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i 

82–468 2013

[H.A.S.C. No. 113–53] 

INITIAL CONCLUSIONS FORMED 

BY THE DEFENSE STRATEGIC CHOICES 

AND MANAGEMENT REVIEW 

COMMITTEE ON ARMED SERVICES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

AUGUST 1, 2013 
(II) 

COMMITTEE ON ARMED SERVICES 

ONE HUNDRED THIRTEENTH CONGRESS

HOWARD P. ‘‘BUCK’’ MCKEON, California, Chairman 

MAC THORNBERRY, Texas 

WALTER B. JONES, North Carolina 

J. RANDY FORBES, Virginia 

JEFF MILLER, Florida 

JOE WILSON, South Carolina 

FRANK A. LOBIONDO, New Jersey 

ROB BISHOP, Utah 

MICHAEL R. TURNER, Ohio 

JOHN KLINE, Minnesota 

MIKE ROGERS, Alabama 

TRENT FRANKS, Arizona 

BILL SHUSTER, Pennsylvania 

K. MICHAEL CONAWAY, Texas 

DOUG LAMBORN, Colorado 

ROBERT J. WITTMAN, Virginia 

DUNCAN HUNTER, California 

JOHN FLEMING, Louisiana 

MIKE COFFMAN, Colorado 

E. SCOTT RIGELL, Virginia 

CHRISTOPHER P. GIBSON, New York 

VICKY HARTZLER, Missouri 

JOSEPH J. HECK, Nevada 

JON RUNYAN, New Jersey 

AUSTIN SCOTT, Georgia 

STEVEN M. PALAZZO, Mississippi 

MARTHA ROBY, Alabama 

MO BROOKS, Alabama 

RICHARD B. NUGENT, Florida 

KRISTI L. NOEM, South Dakota 

PAUL COOK, California 

JIM BRIDENSTINE, Oklahoma 

BRAD R. WENSTRUP, Ohio 

JACKIE WALORSKI, Indiana 

ADAM SMITH, Washington 

LORETTA SANCHEZ, California 

MIKE MCINTYRE, North Carolina 

ROBERT A. BRADY, Pennsylvania 

ROBERT E. ANDREWS, New Jersey 

SUSAN A. DAVIS, California 

JAMES R. LANGEVIN, Rhode Island 

RICK LARSEN, Washington 

JIM COOPER, Tennessee 

MADELEINE Z. BORDALLO, Guam 

JOE COURTNEY, Connecticut 

DAVID LOEBSACK, Iowa 

NIKI TSONGAS, Massachusetts 

JOHN GARAMENDI, California 

HENRY C. ‘‘HANK’’ JOHNSON, JR., Georgia 

COLLEEN W. HANABUSA, Hawaii 

JACKIE SPEIER, California 

RON BARBER, Arizona 

ANDRE ́ CARSON, Indiana 

CAROL SHEA-PORTER, New Hampshire 

DANIEL B. MAFFEI, New York 

DEREK KILMER, Washington 

JOAQUIN CASTRO, Texas 

TAMMY DUCKWORTH, Illinois 

SCOTT H. PETERS, California 

WILLIAM L. ENYART, Illinois 

PETE P. GALLEGO, Texas 

MARC A. VEASEY, Texas 

ROBERT L. SIMMONS II, Staff Director 

ALEX GALLO, Professional Staff Member 

MIKE CASEY, Professional Staff Member 

AARON FALK, Clerk 
(III) 

C O N T E N T S 

CHRONOLOGICAL LIST OF HEARINGS 

2013 

Page 

HEARING: 

Thursday, August 1, 2013, Initial Conclusions Formed by the Defense Strategic Choices and Management Review ............................................................. 1 

APPENDIX: 

Thursday, August 1, 2013 ....................................................................................... 45 

THURSDAY, AUGUST 1, 2013 

INITIAL CONCLUSIONS FORMED BY THE DEFENSE STRATEGIC 

CHOICES AND MANAGEMENT REVIEW 

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS 

McKeon, Hon. Howard P. ‘‘Buck,’’ a Representative from California, Chairman, Committee on Armed Services .................................................................. 1 

Smith, Hon. Adam, a Representative from Washington, Ranking Member, 

Committee on Armed Services ............................................................................ 2 

WITNESSES 

Carter, Hon. Ashton B., Deputy Secretary of Defense ......................................... 4 

Winnefeld, ADM James A. ‘‘Sandy,’’ Jr., USN, Vice Chairman, Joint Chiefs 

of Staff, U.S. Department of Defense ................................................................. 8 

APPENDIX 

PREPARED STATEMENTS: 

Carter, Hon. Ashton B., joint with ADM James A. ‘‘Sandy’’ Winnefeld, 

Jr. ................................................................................................................... 51 

McKeon, Hon. Howard P. ‘‘Buck’’ .................................................................... 49 

Smith, Hon. Adam ............................................................................................ 50 

DOCUMENTS SUBMITTED FOR THE RECORD: 

Statement on Strategic Choices and Management Review by Hon. Chuck 

Hagel, Secretary of Defense, dated July 31, 2013 ...................................... 95 

WITNESS RESPONSES TO QUESTIONS ASKED DURING THE HEARING: 

Mr. Franks ........................................................................................................ 106 

Ms. Hanabusa ................................................................................................... 105 

Mr. McKeon ....................................................................................................... 105 

Mr. Nugent ........................................................................................................ 106 

Mr. Wilson ......................................................................................................... 105 

QUESTIONS SUBMITTED BY MEMBERS POST HEARING: 

Mr. Castro ......................................................................................................... 116 

Mr. Langevin ..................................................................................................... 110 

Mr. Loebsack ..................................................................................................... 113 

Mr. Nugent ........................................................................................................ 116 

Mr. Shuster ....................................................................................................... 114 
Page

IV 

QUESTIONS SUBMITTED BY MEMBERS POST HEARING—Continued 

Mr. Wilson ......................................................................................................... 109 
(1) 

INITIAL CONCLUSIONS FORMED BY THE DEFENSE 

STRATEGIC CHOICES AND MANAGEMENT REVIEW 

HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, Washington, DC, Thursday, August 1, 2013. 

The committee met, pursuant to call, at 10:07 a.m., in room 

2118, Rayburn House Office Building, Hon. Howard P. ‘‘Buck’’ 

McKeon (chairman of the committee) presiding. 

OPENING STATEMENT OF HON. HOWARD P. ‘‘BUCK’’ MCKEON, 

A REPRESENTATIVE FROM CALIFORNIA, CHAIRMAN, COMMITTEE ON ARMED SERVICES 

The CHAIRMAN. The committee will come to order. 

Good morning, ladies and gentlemen. The committee meets today 

to receive testimony on the Defense Department Strategic Choices 

and Management Review. 

This committee has frequently encouraged the Pentagon to fully 

plan for sequestration and to make the consequences of several 

rounds of budget cuts known. With that in mind, I welcome this 

review and what it seeks to achieve. 

I note that the President has directed the Department to maintain his 2012 defense strategy even though his senior commanders 

have testified that the strategy would have to be revised in the face 

of additional budget cuts. Any further consideration of strategy has 

been deferred to the Quadrennial Defense Review, which will not 

report out until next February at the earliest, which is actually 

after the next budget is supposed to be presented. 

In the meantime, the report makes clear that the Department 

will proceed with changes in force structure, compensation, and 

further efficiencies without a new strategy. The most optimistic 

scenario has the President requiring DOD [Department of Defense] 

to find another $150 billion on top of the $487 billion that has already been cut. 

To make matters worse, even if all of the options in this report 

were adopted, it would only address 10 percent of the true budget 

shortfall in the next year or two. The math simply does not add up. 

This report also makes clear what I have been warning about for 

over 2 years: Further cuts will cause catastrophic readiness shortfalls. We will lose our workforce and ability to recruit and retain 

the All-Volunteer Force, and our influence around the world will 

continue to diminish. 

There is agreement on both sides of the aisle and both sides of 

the Potomac that these cuts embolden our enemies and jeopardize 

U.S. national security. We often talk of risk, but I hope that today 

we will have a frank discussion about how this funding profile for 
2 

defense limits the ability of this country to protect our national 

security interests, not simply that we are accepting more risk, 

but what that means for the Nation and our men and women in 

uniform. 

I look forward to hearing the testimony, and I thank both of our 

witnesses for being here today. 

Mr. Smith. 

[The prepared statement of Mr. McKeon can be found in the Appendix on page 49.] 

STATEMENT OF HON. ADAM SMITH, A REPRESENTATIVE FROM 

WASHINGTON, RANKING MEMBER, COMMITTEE ON ARMED 

SERVICES 

Mr. SMITH. Thank you, Mr. Chairman. I appreciate this hearing; 

as well, our witnesses being here. 

This is an incredibly important topic, and, really, it all comes 

down to sequestration. 

The plan, the strategy that the President and the DOD laid out 

a couple years ago based on the reductions in the budget was challenging, to be sure, but manageable. And I think the strategy 

matched the amount of money that was reasonably available and 

also matched our national security challenges and threats as best 

as they could. 

Now we have sequestration coming down at us, and there is really no, you know, end in sight to that. 2013 has been difficult, 2014 

is coming, and there are 8 years after that. And the impact on our 

defense budget and the impact on what we can do in terms of national security is deep and profound. It has already had an impact 

on the readiness that is available for this year, and then we are 

only, what, 3, 4 months into the first year of sequestration. It is 

going to keep getting worse. 

And I really hope our witnesses drive home that point today, 

that if Congress does not act, if we don’t do something to shut off 

sequestration, we have a very bleak future in terms of our national 

security. 

And that is not to say that the defense budget can’t take cuts. 

It can. I think there are a lot of places where you could find greater 

efficiencies. There are a lot of places where we could reduce the 

budget responsibly and meet our national security needs. But saying the defense budget can take cuts and saying that it can take 

10-percent, across-the-board cuts every year for 10 straight years 

are two entirely different things. 

And the impacts of those cuts are deep and devastating and 

would fundamentally alter our commitments to the world and our 

commitments to our own national security and would also have a 

devastating impact on the industrial base. And by ‘‘industrial 

base,’’ I mean jobs. I mean manufacturing jobs, good jobs that really help our economy, protect our workforce. And while a lot of that 

is defense-focused to begin with, we build skills and expertise that 

then helps us in the commercial sector, as well. We would lose that 

also. This is caused by sequestration. 

Now, our budget deficit for 2013 and 2014, the projections on 

that have come down significantly in recent months. Personally, if 

I could do it, I would simply turn off sequestration. It was done as 
3 

a threat, and so we never really wanted to implement it; we just 

figured it would be so bad, it would force broader deficit reduction. 

Well, it didn’t. So why do we keep it on, when we see the impact 

that it is having on our national security, our defense, and, by the 

way, on a whole lot of other discretionary programs, as well? 

But since there appears to be no appetite for simply, you know, 

stepping back from the blind threat that we made a couple years 

ago, it is incumbent upon Congress to come up with some sort of 

plan to find savings and tax increases that can cover the costs so 

that we don’t have to do sequestration and further devastate the 

discretionary portion of the budget, of which defense is over half. 

And, sadly, it seems like the appetite to do that is lessening instead of growing around here. And I know people say, well, you 

know, the sky didn’t fall, the economy didn’t completely collapse 

when sequestration happened, but the final point I will make is 

that sequestration is the classic, you know, ‘‘boiling the frog in the 

water.’’ It is a slow process; it doesn’t happen overnight. But when 

you look at the outyears, the charts as we go forward as these cuts 

get piled on top of each other, you know, the impact is deep and 

profound. 

And it is something that I would urge every member of this body, 

not just of this committee, to really take seriously when we look 

at how we deal with sequestration. Whatever the plan is to come 

up with savings as an alternative, we have to put it on the table. 

Because the impact of this is really, really going to be deep in all 

of the ways that I have described and others as well. 

I can’t say that I look forward to the testimony. I don’t. It is not 

going to be pleasant. But I hope everybody hears it and it motivates people to act. 

I yield back. Thank you. 

[The prepared statement of Mr. Smith can be found in the Appendix on page 50.] 

The CHAIRMAN. Thank you. 

Every member of this committee, I am sure, is very frustrated. 

Our job is to look after the national defense of the Nation. Both of 

you gentlemen, that is your job also. We work in tandem. At times, 

we get frustrated because you come from the Pentagon, we come 

from the Hill. And I know we will have tough questions. I understand Mr. Smith’s comment about he doesn’t look forward to the 

testimony, because it is tough and we are going to have to some 

way get through it. 

But I want to say at the outset, we are all on the same team. 

We are all signed up to look after the defense of this Nation. We 

just come from different parts of the city. And, some way, we have 

to come together to get this problem resolved. 

Today was the first I learned that we—I guess we had been so 

involved with the sequestration, I didn’t notice the $150-billion cut 

in the outyears that the President had already included in his 

budget on top of the $487 billion and on top of the $100 billion that 

Secretary Gates had had cut through efficiencies and had said that 

most of it we would be able to get back, and that turned out that 

we weren’t able to. 
4 

So we are fortunate to have with us today Dr. Ashton Carter, 

Deputy Secretary of Defense, and Admiral James Winnefeld, the 

Vice Chairman of the Joint Chiefs of Staff. 

Thank you, both of you, for being here. 

And, Dr. Carter, the time is yours. 

STATEMENT OF HON. ASHTON B. CARTER, DEPUTY 

SECRETARY OF DEFENSE 

Secretary CARTER. Great. Thank you, Mr. Chairman, Congressman Smith, all the members of the committee. We do appreciate 

the opportunity to be here with you to discuss the results of the 

Strategic Choices and Management Review. 

And to get to something the chairman just said, you know, we 

are all Americans, and we very much appreciate the support this 

committee gives to our people in uniform. It really comes from the 

heart. It matters a lot to us. And we thank you for taking the time, 

which you have to devote to so many topics, to devote to us and 

our Department. So thank you. 

And, also, before I get started with a brief recap of what the 

SCMR [Strategic Choices and Management Review] was about, if 

I could, I just want to emphasize something the chairman said at 

the very beginning which is very important, which is the need to 

act strategically in a time of budget transition. 

We face two great transitions which are occurring simultaneously. One, and the most important one, and I think what the 

chairman’s point was, is the strategic transition from the first post9/11 decade, where we have been so preoccupied, of necessity, with 

the wars in Iraq and Afghanistan, to a new era and to facing and 

dealing with the problems and opportunities that are going to define this Nation’s security future. 

That is a transition we have to make irrespective of budget, but 

it happens to coincide with a very turbulent time in terms of our 

budget and our ability to plan; hence, the SCMR, Strategic Choices 

and Management Review. And it has two parts to it, Mr. Chairman. It has the strategic part and it has the management part, as 

you said. 

Now, the management part is not strategic. That is about IT [information technology] efficiencies, overhead reduction, compensation reform. And none of that is strategic, but if we don’t address 

those issues, which we did in the SCMR, then we would have to 

take all of any budget cuts out of investment, modernization, and 

force structure, which we don’t want to do. So we wanted to look 

at both, and in the SCMR we did look at both. I will make some 

brief remarks about both. 

But to your point, Mr. Chairman, you are absolutely right. And 

we did take a strategic look at those budget reductions, but there 

is a very important finding, which was that, when you took a strategic view and you tried to build your future strategically, we were 

unable in that strategic approach to fill the sequestration gap in 

the early years. I think that is what you meant about the numbers 

don’t add up. They don’t add up in the early years, because the 

things we have to do under sequestration are not strategic; they 

are dumb. And so you can’t make it add up in the early years. 
5 

That is an important finding of the SCMR. I will say a little bit 

more about that later, but I think that that is exactly right. 

And, of course, the SCMR is the preparation for the budget, as 

you mentioned, fiscal year 2015. And we do need to make these 

plans and these changes now and not wait for the Quadrennial Defense Review, as you said, which will be a help to us and which 

we do need to conduct, but it does come late in the process, as you 

said. 

Let me begin by saying, you know, we, of course, support the enactment of the President’s 2014 defense budget proposal because it 

does support the goal of deficit reduction while providing, as we 

will see and as the SCMR indicated, an adequate level of resources 

to maintain a strong national defense in a rapidly shifting and 

highly complex global security environment. 

But, since March 1st, sequestration has been the law of the land. 

Secretary Panetta and I began warning about the negative impacts 

of sequestration on the Defense Department almost 2 years ago. 

And, in fact, it was 1 year ago today that I testified before this 

committee that sequestration would have devastating effects on the 

Department, both because of the size of the sequestration cuts and 

because of the mindless way that the law requires them to be allocated. And, as predicted, sequestration’s impacts on the Department’s operations have been very unfortunate and far-reaching. 

And in the absence of an overall longer-term budget agreement 

between Congress and the President, we have concluded that we 

must prepare and plan for the possibility that sequestration-level 

budgetary cuts imposed by the Budget Control Act will remain in 

effect, as Congressman Smith said, for the years ahead and not 

just for this year. 

And, accordingly, in March, Secretary Hagel asked me, working 

with the Chairman of the Joint Chiefs of Staff, the Vice Chairman 

of the Joint Chiefs of Staff, and all the Department’s civilian and 

military leadership, to conduct the Strategic Choices and Management Review in order to prepare the Department for a range of 

budget scenarios. 

And, as its title suggests and as I mentioned, the SCMR had two 

parts, one focused on strategic choices and one focused on managerial ones, and a unified view was necessary. 

The scenarios, budget scenarios, we considered in the SCMR reflect today’s budget debates. They range from the President’s fiscal 

year 2014 defense budget proposal, which included, as the chairman has noted, an additional $150-billion reduction in defense 

spending over fiscal years 2014 through 2023, most of those cuts 

occurring later in that period, to the Budget Control Act sequestration caps, which would cut $52 billion from defense in fiscal year 

2014 and then 50 again and 50 again and 50 again and 50 again 

for 10 years. 

The formal process of the Strategic Choices and Management Review is now complete, and its findings are sobering. We hope we 

will never have to make the most difficult choices that would be 

required if the sequestration-level budgetary caps persist. But the 

SCMR formulated and framed these kinds of choices for us, and 

now we are at least prepared if confronted with this scenario. 
6 

You can read the details about our findings in the written testimony that the Vice Chairman and I submitted to this committee, 

which I would request be entered into the record. Let me just share 

with you the three key findings of the SCMR. 

First, in all of the budget scenarios we considered, savings from 

reducing DOD’s overhead, administrative costs, and operating expenses, which we refer to as ‘‘efficiencies,’’ as well as serious reforms to compensation for civilian and military employees, both are 

crucial. 

Compensation alone makes up more than half of the defense 

budget. If overhead and compensation continue to grow as the overall budget shrinks, then all of the impact of the cuts will fall on 

the other parts of the defense budget—on force structure, on training for readiness, and on investment in new technologies—resulting in reduced combat power and increased national security risk. 

These reforms are difficult and painful, but we have to do them. 

And to do them, we need the partnership of Congress and the lifting of many legislative restrictions under which we now operate. 

And we also found, however, that even the most aggressive and 

ambitious packages of efficiencies and compensation reform that we 

mapped out in the SCMR are not, by themselves, enough to meet 

the budget reductions called for in any of the scenarios we analyzed. The SCMR showed that cuts in combat power, force structure, readiness, and investment will be necessary in all three of the 

budget scenarios. 

The second finding regards sequestration. The SCMR found that 

over time a combination of carefully chosen efficiencies and compensation reforms, combined with various carefully and strategically chosen alternative approaches to cuts in force structure, investment, and readiness, could achieve sequestration-level cuts 

over time. But there is no strategically and managerially sound approach to budget cuts that can close the gap within the next few 

years. 

I think that is your point, Mr. Chairman, about the numbers not 

adding up. 

We simply cannot downsize the force prudently in a few years. 

Ten, yes; in a few, no. It takes time to downsize forces, to cut employees, to close bases, to reap savings from reforms. These strategic adjustments take time. 

If sequestration-level cuts must be implemented in the meantime, drastic measures that are not strategically or managerially 

sound are the result. And you see this already in fiscal year 2013, 

this year, where we had sequestration applied immediately, resulting in such actions as readiness standdowns and furloughs. Flexibility in time is essential. 

And the third major finding of the SCMR concerns strategy. The 

SCMR showed that the President’s fiscal year 2014 budget proposal 

allows the Department to still implement the main tenets of the 

President’s defense strategic guidance. Force reductions in this scenario are necessary but, if accompanied by efficiency and compensation reforms, can be made in a way that incurs only minimal 

risk in our strategy, cutting parts of the force that are in a sense 

excess to our strategic needs—in particular, for example, reducing 
7 

the size of our ground and tactical air forces as we draw down from 

more than a decade of stability operations in Iraq and Afghanistan. 

But, in contrast, the BCA [Budget Control Act] budget, or sequestration budget, if mandated over the full 10 years, would, in 

addition to the drastic measures in the early years just noted, force 

the Department to make such significant changes to the force that 

we would have to change parts of the Nation’s defense strategy— 

changes that would mark a significant departure from the missions 

our Nation has been accustomed to being able to accomplish. 

The SCMR examined two illustrative strategic options to reach 

sequestration levels that bracket our choices in each force element 

and various choices in between: one bracket that seeks to preserve 

a modernized force by sacrificing capacity and one that preserves 

a larger force at the expense of modernization. Neither is compatible with the current strategy, as defined in the President’s defense 

strategic guidance. Under sequestration, a large number of critical 

modernization programs would be at risk, and we would see significant reductions in force structure. 

So, to reiterate, the SCMR did not make final choices among 

these possibilities because we hope never to have to face them, but 

it did map out various options to reach each budget scenario. The 

SCMR produced options that would prepare the way for these large 

cuts, but I have to emphasize that plans alone cannot avoid serious 

damage to our military capabilities. 

Tragically, this prospect of serious damage to national security, 

detailed in the written testimony we have submitted, is not the result of an economic emergency or a recession that makes a sudden 

reduction in expenditures necessary. It is not because defense cuts 

are a mathematical answer to the Nation’s overall fiscal challenge 

or because paths of revenue growth and entitlement spending have 

been explored and exhausted. It is not, surely, because the world 

has suddenly become more peaceful. It is not due to a breakthrough in military technology or a new strategic insight of some 

sort that makes continued defense spending unnecessary. It is 

purely the collateral damage of political gridlock. 

And friends and potential enemies around the world are watching our behavior. To be sure, America will remain the world’s 

strongest military power, but we are accepting unnecessary risk. 

Secretary Hagel and I also fully support the President’s overall 

budget plan in his fiscal year 2014 budgetary proposals for other 

Federal agencies. 

DOD depends on a strong education system to provide qualified 

recruits for our All-Volunteer Force; an unrivaled science and technology base and a strong manufacturing base to maintain our decisive technological edge; infrastructure that surrounds our bases 

and installations; and other agencies of law enforcement, homeland 

security, intelligence, and diplomacy to complement the military instrument of power; and, more generally, on a strong economy to 

buttress our role in the world. 

We in the Department of Defense are prepared to make difficult 

strategic and budgetary choices, but in order to sustain our military’s unrivaled strength, we need the cloud of uncertainty dispelled and not just moved to the horizon. 
8 

Along with budget stability, we need time to make changes strategically, and we need the support of Congress to make budget cuts 

in a managerially sensible way. We need to return to normal budgeting and a deal that the Congress can pass and the President can 

sign. And then, together with Congress and this committee in particular, we can continue the strategic transition upon which we 

need to be embarked with certainty and stability. 

Thank you. 

[The joint prepared statement of Secretary Carter and Admiral 

Winnefeld can be found in the Appendix on page 51.] 

The CHAIRMAN. Thank you. 

Admiral. 

STATEMENT OF ADM JAMES A. ‘‘SANDY’’ WINNEFELD, JR., USN, 

VICE CHAIRMAN, JOINT CHIEFS OF STAFF, U.S. DEPARTMENT OF DEFENSE 

Admiral WINNEFELD. Chairman McKeon, Ranking Member 

Smith, members of the committee, and I would allude to the chairman’s remark, I would say teammates in supporting our national 

defense, good morning. And thank you for the opportunity to appear today on this important topic. 

I was confirmed for this position the same day that the Budget 

Control Act was passed in 2011. I have had the opportunity to participate in every effort since then within DOD to cope with this unfortunate mechanism for reining in our spending in support of the 

national security imperative of deficit reduction. This includes the 

initial BCA cuts that year, and it also includes the carnage of the 

fiscal year 2013 sequester in its timing, its magnitude, and its 

mechanism. 

As we look toward an uncertain future, I helped Deputy Secretary Carter lead the SCMR as we stared into the chasm of what 

we call ‘‘sequester forever.’’ And so I would make the following 

points this morning, many of which will underscore what Deputy 

Secretary Carter said. 

First, I want to assure you that the SCMR process was very collaborative, with the Services and combatant commanders and other 

DOD components participating at every stage. This was a deep and 

painful internal look at every corner of our institution. All the 

stakeholders were involved in the process, and the process has 

made us better. 

Second, the SCMR was not an academic exercise. We looked at 

everything, and we did it from the viewpoint of balancing strategic 

ends, ways, and means. As you may recall, the defense strategic 

guidance published a year and a half ago was our first bite at this 

apple, because all three elements of that equation had changed. 

The potential for additional cuts now further upsets that balance, 

and the SCMR offers us choices on how to restore it. 

When the means come down drastically, something else in the 

equation has to give, or we will face a strategic say-do gap. With 

reduced means, we will work as hard as we can on the ways we 

use in order to preserve the ends we need to meet at acceptable 

risk. But, in the end, we could face a serious decline in our ability 

to protect this Nation and our allies. 
9 

Third, the most damaging element of this whole process, as Deputy Secretary Carter has alluded, is the speed at which the reductions hit us. They are sudden and deep rather than backloaded and 

gradual. 

For a variety of reasons—for example, how fast we can or should 

get people out of the service, and the legislative limits on the ways 

we can cut—at the BCA level of reductions, they simply happen 

faster than we can digest them in a balanced and sensible way. On 

that profile, all we will be able to do in the early years is grab 

money wherever we can, mostly out of the modernization and readiness accounts, which is particularly disruptive to our ability to defend this Nation. 

Fourth, again, as the Deputy said, we need the freedom to find 

savings in our structural costs and our compensation first, or the 

structure, modernization, and readiness of the force that defends 

our Nation will have to be reduced even more. 

I can tell you Chairman Dempsey and I are very concerned that 

most of that could come on the back of readiness. And, indeed, no 

matter what happens with the fiscal year 2014 budget, we will 

begin next year trying to dig out of the readiness hole that sequester created for us this year. Imagine trying to be in a swimming 

race where you have lead weights on your legs and starting that 

race when you are already out of breath. That is the situation we 

will be facing in fiscal year 2014. And this is a real problem that 

is getting worse every day, and we ignore it at our peril. 

Fifth, I want to emphasize that this effort was about teeing up 

choices. No decisions have been made, because they cannot yet be 

made, because we don’t know how much money we are going to 

have, and we don’t know when we are going to know how much 

money we are going to have, and we don’t know what the rules are 

going to be when we find out. And so it is very hard to produce 

a strategy when one leg of the ends, ways, and means stool is so 

uncertain. 

Moreover, I am concerned, and Chairman Dempsey shares my 

concern, that as Members begin to understand what these cuts 

mean in real terms, we will end up with legislation or amendments 

that foreclose bit by bit the levers that we need to shape this force 

strategically, and they will funnel us in to principally taking the 

only thing that is left, and that is readiness, which really has no 

constituency other than the young soldier, sailor, airman, or marine putting his or her life on the line for our Nation’s security interests. And we are already seeing this. 

It will be truly shameful if we allow this force to travel further 

down the path to becoming hollow than it already has over the 

course of this year. I believe the members of this committee can 

help fix this by reaching a compromise that changes the magnitude, the profile, and the mechanism of these cuts and avoids a 

destructive continuing resolution with the sequester mechanism 

riding on top of it. 

So, to the degree that we must cut, we ask you to support expanded reprogramming flexibility so we can shape the force strategically. Allow us to make needed but fair adjustments to the way 

we compensate our people, and allow us to shed unnecessary structure and infrastructure. 
10 

In short, we have enough uncertainties among the many security 

risks facing this Nation today. We need your help in removing the 

risk of the financial uncertainty that faces your Department. It is 

the least we can do for the magnificent young men and women who 

stand on the front lines for our Nation and who, no matter what 

happens, will always strive, supported by our fabulous DOD civilians, to remain the finest fighting force in the world. 

So I would like to thank you for your continued support of those 

wonderful people, and we stand ready to support you with whatever information you need to get this done. 

I look forward to your questions, and thank you very much. 

The CHAIRMAN. Thank you. 

You know, I have been struck by the news reports that have suggested that senior defense leadership saw this review as an effort 

to, ‘‘set clear strategic priorities to implement the President’s defense strategic guidance at a time of huge financial challenges.’’ 

Indeed, our briefings yesterday that some of us were able to attend made it clear that the President directed the DOD to retain 

the defense strategy and not to use the SCMR to contemplate alternative frameworks. 

Yet, last April, General Dempsey testified, ‘‘We adjusted our 

strategy after the lessons of 10 years of war and our projection on 

what the Nation would need in 2020, and we mapped the 2013 to 

2017 budget to it, absorbing the $487 billion cut, and that if we 

have to absorb more cuts, we have to go back to the drawing board 

and adjust our strategy. What I am saying to you today is that the 

strategy we would have to adjust to would, in my view, not meet 

the needs of the Nation in 2020.’’ 

This February, he went on to say, ‘‘The question I would ask this 

committee: What do you want your military to do? If you want it 

to be doing what it is doing today, then we can’t give you another 

dollar.’’ That said after the $487 billion in cuts. Since then, we 

have had sequestration piled on top of that, which is another $500 

billion, after he said, we can’t do this strategy if we give you another dollar—$500 billion and $150 billion. That is $650 billion on 

top of it. 

Now, I know the President took the $500 billion out of his budget, he put the $150 billion, but the $500 billion is law. And until 

it is changed, we have to consider that that is the law. 

Admiral Winnefeld, do you agree with these statements of General Dempsey? 

Admiral WINNEFELD. Chairman McKeon, what I do agree with is 

that the President never directed us to not depart from the DSG 

[Defense Strategic Guidance], as far as I can remember. Basically, 

we used the defense strategic guidance as the baseline, and it was 

something that we strove to protect as best we could with potential 

budget cuts. 

What we discovered as we went through this is the deeper those 

budget cuts go, and particularly under the BCA cut levels, the $52 

billion forever, that it is going to be very hard to execute that strategy. There are areas where it will break. And I would say that we 

can’t write a new strategy until we know what the bottom line is 

going to be, what level of cut we would have to take. 
11 

So we are sort of trapped in this strategic no man’s land of—we 

now understand, based on the SCMR, what choices we might have 

to make, which would certainly inform a new strategy if we had 

to write one. But we don’t know which choices we are going to have 

to make until we know what the level of funding is going to be. So 

we are really sort of trapped there in that regard. 

And I would also add that, you know, this was a very deep and 

painful process. In it, we really, really strived, as Secretary Carter 

mentioned, to find more efficiencies. It is just something we always 

try to do; it is where we want to turn first. And when you can do 

that, and if you look at compensation, those things don’t really 

start to add up until the outyears. And that is why you see a greater willingness to maybe take some of that step but have it 

backloaded, because that is where we can get it. We can’t get that 

upfront. 

The CHAIRMAN. You know, I guess we just look at this strategy 

a little differently. We had a strategy that has been good for this 

Nation since World War II, where we would be able to fight two 

major conflicts at a time, a lesson that we learned in World War 

II. And that strategy has stood us well up until a little over a year 

ago, and we were forced to cut $487 billion out of defense. We cut 

almost a trillion dollars out of our domestic spending, and half of 

that came out of defense, even though defense only accounts for 

about 17, 18 percent of the overall spending. Defense got the big 

hit. And as a result of that, the strategy changed. And like I say, 

that was just a little over a year ago. 

I have always felt like what we would expect of our military leaders is, you tell us the threats that we have, you set a strategy to 

meet those threats and then how much it is going to cost to do 

that, then we have to someway come up with the money, instead 

of, this is how much money we have and then how do we devise 

a strategy to fit the amount of money. 

With further sizeable cuts, will a new defense strategy be required because the President’s 2012 defense strategy can no longer 

be supported with acceptable risk? You know, in the discussion yesterday, we didn’t talk about any different risk or how much more 

risk we are going to have to accept. 

If not, will we see an updated chairman’s risk assessment? You 

know, the last QDR [Quadrennial Defense Review] really didn’t do 

an adequate job of really telling us what the risk would be out 15, 

20 years. I hope the one that we get next year will do a better job 

of that. 

If we are going to see—if we are going to keep the President’s 

current strategy and resource it less, because the last one already 

described significant risk, where does that leave us? How are we 

going to find out what additional risk we are asked to assume if 

we follow through with all of these cuts? 

Admiral WINNEFELD. So, a couple of things. 

First of all, in the initial part of your question, I share your frustration. We would like nothing more than to be able to state the 

ends first and then naturally have the means appear. But, in the 

real world, we really can’t do that. It really is a balance of ends, 

ways, and means. And we have to look at the ways we have, we 

look at the ends we are trying to achieve in the world, the means 
12 

we have, and try to be as innovative as we possibly can to try to 

achieve balance, achieve an equilibrium among those things. We 

have to have our strategic work informed by means. 

Now, we would love, again, to do that, just set the ends and give 

us the money, but that doesn’t really work very well—— 

The CHAIRMAN. You know, Admiral, the real world can change 

on a dime. When Pearl Harbor happened, I am sure everything 

changed, and we changed our focus, and all of a sudden we found 

whatever resources we needed to meet the threat, and everybody 

bought in. The problem is now everybody isn’t buying in with everything we have got. But I understand what you are saying about 

the real world. 

Admiral WINNEFELD. If I could, just very briefly on the defense 

strategic guidance, the chairman, when we submitted that this 

year, did hold out that if the financial situation gets worse, we 

might have to provide an update. And we are considering at this 

moment whether we are going to do that. 

And we reframed the chairman’s risk assessment this year. Rather than being sort of a regional tour d’horizon, we tried to frame 

it in what we call, you know, national security interests or national 

defense priorities. And that is the approach we would take if we 

were to provide an update, sort of a midterm update. 

Secretary CARTER. Mr. Chairman—— 

The CHAIRMAN. You know, I really think that is needed, because 

we try to go and explain this dilemma to the other Members of 

Congress, who right now are sitting in other committees, they are 

studying other issues, they are not focused on this issue. And when 

we just say, we are really cutting the military too much, they don’t 

understand. But if we were to say, a third of our air force is 

grounded, we could not right now do another Desert Storm, we 

could not do—what are the things we cannot do with the $487 billion cuts we already have and if the sequestration continues? We 

need to be able to tell the world. 

I think the world is watching, but I am not sure all the American 

people are, and I am not sure all the other Members of Congress 

are. Because I don’t think people are quite grasping the real significance and the real importance of what these cuts are doing, the 

devastation that they are causing to our ability to defend our 

Nation. 

Secretary CARTER. Mr. Chairman, if I can just add one thing to 

what the Vice said and just reinforce, the President’s strategic 

guidance—in the testimony we submitted is the letter that Secretary Hagel signed kicking the SCMR off, and the phrase he used 

in there was that the President’s strategic guidance would be the 

‘‘point of departure.’’ 

And so it was recognized from the beginning that if we get big 

budget cuts relative to the strategy that we designed a year and 

a half ago, there is an impact on strategy, there is no question 

about it. I think that is what the Chairman was saying to you previously, and that is what the Vice said, and that is certainly true. 

I just want to be absolutely clear about that. 

Now, when you make those strategic choices, you can make them 

in different directions. You pointed to the question of capacity for 

simultaneous conflicts. That is an important ingredient of strategy. 
13 

There are others: nuclear deterrence, counterterrorism, and so 

forth. But as the Vice said, as the budget is disrupted and reduced, 

there are going to be things we can’t do any longer. 

And we adumbrated that in the Strategic Choices and Management Review. And we continue to work on how to adjust to that 

circumstance. We know the world is watching. It is embarrassing 

and unsafe to be in the situation we are in, which is scrambling 

in this way. 

The CHAIRMAN. Thank you. 

Mr. Smith. 

Mr. SMITH. Thank you, Mr. Chairman. 

Just an observation at the start of mine. I mean, it is a matter 

of budget choices. I mean, if we want to say to the Defense Department, you know, tell us what you need to do and then we will get 

you the money, then we need to make choices in other parts of the 

budget, both on revenue and on spending. 

And then the choices we have made in the last decade, you know, 

have been to, you know, dramatically cut taxes and dramatically 

increase spending. You know, even on entitlements, we passed a 

prescription drug benefit and we have cut taxes by some $6 trillion, 

$7 trillion over the course of the last, you know, 10 years. And here 

we are. 

So if you take the isolated portion of the defense budget, you can 

argue for more money for it, but if you really want to argue for 

more money for it, then you have to argue for less someplace else 

or, as I have advocated, for more revenue. And that is what is really missing from the discussion, is that, you know, sort of, grandbargain approach to better align where our spending is at. 

And don’t get me wrong. As I have said earlier, I certainly think 

the defense budget—the chairman and I probably don’t see eye to 

eye on this—can take a portion of that. There could be some cuts 

there and we could still meet our strategy. 

The problem is, what the Budget Control Act did is it put everything on the discretionary budget, you know, and it put all of the 

cuts, you know, not just on defense but on transportation, infrastructure, research. Some of my colleagues on other committees 

have been getting, you know, similar briefings to this about NIH 

[National Institutes of Health] funding or about infrastructure 

funding that, trust me, are just as devastating in terms of the priorities and in terms of protecting our country. 

So that brings me back to the original point, that if we want to 

stop sequestration, we have to honestly address those other issues. 

Dr. Carter, I wanted you to elaborate a little bit on the personnel 

side of it. Because that is the other problem, is that Congress has 

restricted you; not just that we said 10 percent across the board, 

we then also restricted where you can make those cuts in ways 

that make it even more difficult. 

The committee is adamantly opposed to base closure, so you have 

no flexibility where that is concerned. Personally, I support base 

closure. I think if we are going to bring down the size of the force, 

it is completely logical. We have refused to do anything except the 

modest increase we did on TRICARE [Department of Defense 

health care program], I think, a couple years ago. And on the personnel side, you know, we continue to exempt that. 
14 

Can you walk us through those numbers a little bit and how 

being able to have some more flexibility in those and perhaps other 

areas could help you? 

Secretary CARTER. I absolutely can. 

Let’s start with compensation. Compensation, both military and 

civilian, makes up about half of our budget. Nobody, in my judgment, none of our soldiers, sailors, airmen, marines, or DOD personnel, is overpaid. We value these people. We want them, and, 

particularly those who are fighting for us, we value what they are 

doing. 

But we cannot continue to have compensation grow in the way 

it has over the last decade, or it won’t be half of the budget, it will 

be 55 percent, 60 percent, and so forth. So, at some point, the rate 

of growth in pay needs to slow. 

We have made, as you indicated, proposals that would do that 

that we think both adequately honor our forces, are effective in the 

labor market in keeping really good people coming into our military—because that is what makes our military great—and are fair. 

And we have not been able to make those changes. 

Likewise with health care. Health care in DOD, like health care 

in the rest of the economy, is growing in such a way that, once 

again, it will engulf the rest of the budget. We have made some 

proposals that we thought were fair, reasonable, we thought about 

them very hard, and were not able to get them enacted. 

In the SCMR, we identified—I am looking at the numbers here— over the 10-year period, $63 billion over that period in additional 

efficiencies that we think we can get and $97 billion in compensation changes that we would recommend. So that is 160 out of the 

500; that is about a third of the cuts we are required to take, 

out of more than half of our budget, so it is still not cutting in 

proportion. 

But we need support for these things. You mentioned BRAC 

[Base Realignment and Closure]. That is another popularity winner. But I can’t tell you anything else but that we need to do that. 

Otherwise, we will be all ‘‘tail’’ and no ‘‘tooth’’ to our military. 

So these aren’t strategic questions, as I said at the beginning; 

these are managerial questions. But they have strategic consequences, because we will end up with these bills overwhelming 

investment and everything else. So we really do appeal for understanding and support here. 

We intend, as part of the fiscal year 2015 budget, as we did in 

2014, as we did in 2013, and back when I was with Secretary Gates 

in 2010 and 2011, then also, appealing to be able to make these 

changes. 

Mr. SMITH. Well, you are kind of—— 

Secretary CARTER. That is the smart and sensible way to take a 

bite out of budget cuts if we do face them. 

Mr. SMITH. Yeah, you are kind of trapped in the middle here, in 

that, you know, collectively, Congress is doing nothing about sequestration, but, individually, we all want to imagine that it is not 

going to happen, so that we look at, you know, cuts that impact our 

districts or impact programs that are important to us, and we fight 

them just like it was 8 years ago, you know, when we had a big 

defense budget. 
15 

And it is like Congress has kind of got to choose. I mean, if we 

don’t like sequestration, if we want to, you know, preserve these 

bases and preserve all these other things, then we had better stop 

sequestration. But as long as it continues to roll on, we are way 

behind the curve on adjusting to the new reality and giving you the 

flexibility that you need if, in fact, sequestration is the way of the 

world. 

And, as I said, I would turn it off tomorrow, but we don’t have 

the votes for that. So if it is what it is, we have to start legislating 

within that reality. 

Thank you. Appreciate the testimony. 

I yield back. 

The CHAIRMAN. Thank you. 

Mr. Thornberry. 

Mr. THORNBERRY. Thank you, Mr. Chairman. 

Dr. Carter, just to be a little more specific on what you and Mr. 

Smith were talking about, I am looking at a chart that shows fiscal 

year 2014 in particular. And it shows the specific recommendations 

that you all have made on pay and health care and retaining aircraft and ships, and it ends up being about $5 billion worth of difference in fiscal year 2014. But that leaves about $47 billion worth 

of difference that it doesn’t touch. 

And so, to me, I take your point. It is a little bit like my constituents who argue, I know how to balance the budget, just cut foreign 

aid. 

Well, there are proposals you all have made. We have not agreed 

with them all, absolutely. But, at the same time, the huge portion 

that shows on this chart is not touched at all by the recommendations you all make for 2014. 

I understand, a lot of this is in the outyears and the savings 

grow, is part of the answer. But looking at what is right in front 

of us, under sequestration, there is $47 billion that you all don’t 

have a plan for, right? 

Secretary CARTER. Well, we don’t have a strategically and 

managerially sound way to make those cuts. That was the point I 

made at the beginning. That whole orange pie has to be filled in 

with things that you and I would never sit in a room and think 

about doing as sensible things. 

The little red wedge, yes, is the beginnings of some of the efficiencies that we were just discussing with Ranking Member Smith. 

What you see there in orange—it is ironic, because orange is the 

color we have used in our own review for dumb gaps—that is a gap 

that can’t be made up in a strategically and managerially sensible 

way. 

That is what we have been doing this year. That is why you see 

furloughs. Would you furlough somebody if you thought about it in 

advance and could take time? Would you stand down readiness so 

that you didn’t have units flying, you didn’t have ships sailing? We 

wouldn’t do any of that stuff—— 

Mr. THORNBERRY. Yeah. 

Secretary CARTER [continuing]. If we had our—— 

Mr. THORNBERRY. The only point I would emphasize is, I think 

it is important that we all work to put this in context. And so, for 

the Administration to continue to emphasize the request it makes 
16 

that we may disagree with, I think it is a fair point to make it, but 

put it in context, that it doesn’t deal with the overwhelming majority of the problem that we have in front of us. 

Similarly, base closing, it costs money for 2014. It would make 

that problem worse. And, certainly, given the recent track history 

of 2005 base closing, it would make it much worse. It is going to 

take 15 years before you ever break even, et cetera, et cetera. 

Let me just move to Admiral Winnefeld, because I want to ask 

one other question. 

I understand that the combatant commanders have been instructed to update their operational plans 18 months ahead of 

schedule. And we probably can’t talk about this in great detail 

here, but I would like to know why. 

And it looks to me like we are again getting the cart before the 

horse, because that basically is the strategy. The demand signal on 

the people and the stuff that we need to carry out operations in 

certain theaters, you are telling them ahead of time to go ahead 

and update that now before any of the rest of this is settled. 

Admiral WINNEFELD. There are a lot of really good reasons, Congressman, for taking a look at our OPLANs [Operation Plan]. We 

don’t do it often enough to start with. We don’t want to fight the 

last war. We are always accused of fighting the last war; I don’t 

want to do that. 

There are a lot of things that can change that will influence how 

you fight. One is evolutions in the threat. And almost every threat 

we face in our major planning scenarios—and you can imagine 

what they are in the Western Pacific and in Iran and that sort of 

thing—those threats are changing rapidly. So we need to account 

for that. 

Our own technology is changing. Those plans, in many cases, are 

written based on old technology that we have. Congress has given 

us the funds in the last few years for new technology. We need to 

update those plans. The world is changing very quickly. 

And I would also say that if we can find a better, more innovative way to execute those plans, that will take some of the pressure 

off of the uncertainty in the financial world that we are feeling 

right now. But that is not the only purpose for asking them to take 

a look at their plans. In fact—— 

Mr. THORNBERRY. My time is running out. So it is changes in the 

world, or is budget included in the reason that they are asking for 

doing it 18 months ahead? 

Admiral WINNEFELD. It is everything, Congressman. 

Mr. THORNBERRY. Including budget. 

Admiral WINNEFELD. Ends, ways, and means, including budget. 

But mostly the fact that our technology has changed, the threat 

trajectory has changed, the world has changed, and I don’t want to 

fight the last war. 

The CHAIRMAN. Thank you. 

Ms. Davis. 

Mrs. DAVIS. Thank you, Mr. Chairman. 

Thank you, both of you, for being here. 

I really appreciate the comments that my colleague just made, 

but the reality is that, even though the Congress can’t maybe 

change all of that and close the gap, there are things that we can 
17 

do. And so I think that we need to look at that within the context, 

as well. Because some of those changes, with thoughtful discussion, 

might lead to some differences that might be helpful to you. And 

I hope that we can do that. 

I also wanted to ask about if these furloughs continue. If we 

don’t solve the problem of sequestration, will you be forced to continue to furlough civilian employees? 

Secretary CARTER. First, with respect to furloughs for this year, 

that is, fiscal year 2013—— 

Mrs. DAVIS. So I am looking at, yeah—— 

Secretary CARTER. I understand. 

Mrs. DAVIS [continuing]. For fiscal year 2014. 

Secretary CARTER. As I understood, you had a question both 

about 2013, the continuation, and whether we need to do it in 

2014. 

With respect to 2013, we hope that we will be able to adjust the 

furlough level. We have set it at 11 days. Furloughs are under way. 

In most organizations, they are going at about 1 day a week. That 

means 1 day, a payday, per week lost for an individual and their 

family. This is not a joke. It is very serious and no way to treat 

people. And, therefore, we are looking in every way, as we reach 

the end of the fiscal year, can we find money somewhere? 

I will give you some examples. Some of our war costs associated 

with Afghanistan—it is a war, so you don’t know exactly how much 

you are going to spend. If, by the end of the fiscal year, we have 

money left over, so to speak, we want to be able to see that in advance and apply that to furloughs. 

Mrs. DAVIS. Uh-huh. 

Secretary CARTER. Fuel prices are a little different, changing in 

our favor. 

So we are looking around as part of our general effort to manage 

under sequestration in the smartest way possible, given that it is 

a dumb thing. And if—— 

Mrs. DAVIS. What about freezes on civilians? 

Secretary CARTER. If we do find funds between now and the end 

of the year, we have two priorities. One is to restore maintenance, 

and the other is to relax furloughs. So that is what we are doing. 

In 2014, if we have sequestration in 2014, and I think the Secretary has indicated this, it goes beyond sequestration to the possibility of RIFs [Reduction in Force]. It goes to the possibility of involuntary separations of service members. Because it just gets 

worse and worse and worse over time. Obviously, we hate to do 

that kind of thing, but that is the kind of thing that becomes necessary if sequestration continues. 

Mrs. DAVIS. While it is difficult to, I think, see the impacts as 

yet—and I think you mentioned this earlier—what do we know 

about those impacts, though, in terms of, you know, have you established some metrics? What do we know about retention, recruitment? What do we know about performance, productivity? What do 

we know about these that might be helpful to us and instructive? 

Secretary CARTER. Well, we know quite a bit, and we are trying 

to use the experience of operating under sequestration in 2013 to 

do better if we have to in 2014, even though the problem gets 

worse. 
18 

But I will just give you a few examples of how it is different. 

Let’s take an investment program, an acquisition program. You 

know, you all, very rightly, and I, especially when I was Under Secretary for Acquisition, Technology, and Logistics, get so frustrated 

with poorly performing programs, weapons programs. Well, sequester makes well-performing programs into poorly performing programs. It drives up unit costs, it causes schedule delay, all the 

things we hate, because it is a poor use of taxpayers’ money. 

I have already said the impact on people. On readiness—and 

Admiral Winnefeld can chime in on this if he wishes, but our 

readiness problem will get even worse in 2014 because we have deferred some expenses into 2014 in the hopes that we wouldn’t face 

sequestration. 

So we have looked at this very carefully. We are as prepared as 

it is possible to be for sequestration in 2014. How we are doing it 

is outlined in a very long letter that Secretary Hagel sent to Senators Levin and Inhofe 2 weeks ago, and I commend that to your 

attention. It is attached to Admiral Winnefeld’s and my testimony. 

And it gives our plan for fiscal year 2014. 

But, you know, again, being prepared and having a plan doesn’t 

mean it is not really unconscionable. 

Mrs. DAVIS. Uh-huh. 

Admiral WINNEFELD. And just very briefly, you asked about the 

effect on retention and recruiting. Retention and recruiting are a 

very complex animal that depend on a lot of factors—the economy 

out in the rest of the country and so on. But I know that the Chairman and I are both fond of saying that today’s readiness crisis is 

tomorrow’s retention crisis. These folks want to be in, and they will 

not stay if they are not training. 

Mrs. DAVIS. Thank you. 

The CHAIRMAN. The gentlelady’s time has expired. 

Mr. Jones. 

Mr. JONES. Mr. Chairman, thank you very much. 

And, you know, I sit here and listen to you very carefully. Yesterday, we had John Sopko, the Inspector General for Afghanistan Reconstruction, in a hearing in the Oversight Committee. You know, 

it is almost like we have two different worlds up here. We have the 

Washington world, and then we have the world of 49, 50 States out 

here. 

Down in Jacksonville this past week, the Jacksonville paper, 

‘‘Furloughs to Impact Mental Health Treatment,’’ ‘‘Marines React 

to Mental Health Furloughs.’’ I don’t have time to read some of the 

comments to you. I would like to. 

You know and you have been talking about the problem. And the 

chairman made the comment, and he is right, that when we go to 

the floor and we talk about all the problems that will hit the military and the defenses of our Nation, a lot of Members don’t believe 

it. Well, they can’t believe it, because we keep sending money to 

Afghanistan, billions of dollars. In the two wars of Iraq and Afghanistan, we spent over $1.7 trillion, and we cannot even adequately take care of the wounded coming back home. Here I gave 

the example of the mental-health cuts down at Camp Lejeune. 

I think that this Administration and the Congress needs to face 

the facts. The facts are, when you have to borrow money as a gov-
19 

ernment to pay your bills, then you need to reconsider how much 

of the world do you want to build empires in. And I do not understand why the President feels the obligation, or the State Department, to have a bilateral strategic agreement with Afghanistan. 

Karzai is going to leave one day; the Taliban will take over Afghanistan. He will be smiling from his castle somewhere that Uncle 

Sam and the poor taxpayers built for him. 

Dr. Carter, I know you don’t make policy, I understand, as far 

as foreign policy. But we need the leadership in this country, both 

in Congress and outside of Congress, to start speaking clearly and 

honestly to the American people. And the situation is that if we are 

going to rebuild our military—which right now we can’t do because 

we don’t have the money; we are in sequestration—somewhere 

along the way, policymakers have got to start speaking out, that 

we have to change our strategy. 

And that is what I hope that Secretary Hagel is doing. I have 

great respect for him. I think he is a man of integrity. He is a man 

that I have the greatest respect for. And maybe that is what we 

are headed to. 

We have to get smarter with our policies. Because we are going 

to be in sequestration a little bit longer, maybe a year or 2, and 

you are going to continue to have to take these cuts, furloughs. The 

chairman and ranking member are going to have to hold these 

hearings. But we are not going to move forward. We are just going 

to have these discussions and stay in the same status quo that we 

are in today. 

So I hope—and I am going to stop, I want to listen to you and 

the Admiral—but I hope at some point in time somebody will start 

saying, listen, America, you no longer can police the world, nor 

should you police the world. Help us rebuild America first and rebuild the military. And that is where we are. 

Do you have any comments? 

Secretary CARTER. Thank you. Just two things to note. 

One is that, whatever any of the Members think of Afghanistan 

and the campaign in Afghanistan and the rationale for it and the 

success of it and so forth, one thing is for sure, which is of great 

importance to the Department, as you note, which is that we are 

winding down our involvement in the war in Afghanistan. And people are still debating how fast and how much and so forth, but no 

question about it. 

And that has some real consequences for us. And it gets back to 

the very first thing I talked about here, which is: We are and must 

be, as a department, embarked on a major transition from the era 

we are coming out of, anchored in Iraq and Afghanistan and the 

first post-9/11 counterterrorism focus, to what we are going to do 

in the future and what we can do in the future given our level of 

resources. 

That is more important than anything about the budget, to make 

that strategic transition. And, in that regard, I very much identify 

with what you were saying. 

Mr. JONES. Thank you. 

The CHAIRMAN. The gentleman’s time has expired. 

Ms. Bordallo. 
20 

Ms. BORDALLO. Thank you, Mr. Chairman. And thank you for 

holding this hearing. 

And thank you, Dr. Carter and Admiral, for your honest and 

forthright testimony today. 

I continue to find it deeply concerning that Congress has placed 

the Department of Defense in the position you are in today, to 

make these tough, tough choices. And I fully support having a robust military to defend our Nation and our interests, but we in 

Congress must do our part to ensure you have the resources to 

meet current and emerging challenges. 

I support ending sequestration immediately and in its entirety. 

Finding a comprehensive solution to sequestration will allow DOD 

to properly plan and prepare for potential conflicts of the future. 

And that is the bottom line here. We are not allowing the world’s 

greatest fighting force to effectively and efficiently maintain pace. 

And it is a message that will see some action in the near future. 

And we in Congress are the problem. 

Dr. Carter, I would like to know if you can discuss the SCMR results with respect to the rebalance to the Asia-Pacific region. I met 

earlier this week with the Senior Vice Minister of Defense for 

Japan, and I understand that you met him as well. While we had 

a good discussion on the Marines’ realignment from Okinawa to 

Guam, I know we both had concerns about the timing of these 

moves. 

So can you elaborate on the impact of the Guam realignment and 

if you foresee any changes from the previous testimony provided by 

yourself and others on the commitment to the Pacific region? And 

how does the results of the SCMR exercise impact the realignment, 

if at all? 

Secretary CARTER. Thank you. And thank you for meeting with 

Minister Eto during his visit here. 

The rebalance to the Asia-Pacific theater is a central tenet of our 

strategy. I think it is so obviously a part of the world that will be 

central to America’s future that we will always have that high on 

our priority list. And it remains high on our priority list, and we 

are doing everything we can under sequestration and in all of these 

budget scenarios to protect investments in the rebalance in the 

Asia-Pacific. 

Now, at the extreme ends, where you get sequestration for a decade, we are not going to be able to do everything that we have 

planned to do in the Asia-Pacific. We are just not going to be able 

to do it. But it will still be a priority, and we will still be able to 

do much of it. 

And it is important that people in the region, both our friends 

and potential opponents, understand that we have the capacity and 

will to do that. 

And there are two reasons for that. One is that we are now able 

to shift a lot of the weight that we have had in Iraq and Afghanistan to the Asia-Pacific theater. Some of that equipment and those 

people are showing up already. And, second, in our budget, whatever our budget level is, and as we went through these various scenarios, we attached priority to the things that are most relevant to 

keeping the peace in the Asia-Pacific theater. 
21 

We have done that for 60 years. It had been good for everybody, 

including us. If they think about it, it is good for China, it is good 

for India. It is the environment in which Japan, South Korea, 

Southeast Asia, all these economies have arisen. There is no NATO 

[North Atlantic Treaty Organization] over there. There is no law of 

nature that says that there is going to be peace in the Asia-Pacific. 

It is the pivotal role of the American military power which has 

done that for 60 years. We need to keep doing that and do as much 

of it as we can in any budget scenario. 

Ms. BORDALLO. Well, thank you. Thank you very much, Mr. 

Secretary. 

And I have another quick question. I believe the long-range 

strike capability is of critical importance, not only in the Pacific region but for any future conflict we may be involved in. As a cochair of the House Long-Range Strike Caucus, I am interested to 

know how the Air Force next-gen bomber is addressed in the 

SCMR. 

Maybe Admiral? 

Admiral WINNEFELD. The Long-Range Strike Bomber is a very 

important program for us for a number of reasons. Principally, the 

two of: It is a vital leg of our strategic deterrent, of the triad; and, 

second, it is a very important element of potential future 

warfighting concepts that we would need from a standoff capability 

and also a penetrating capability. So we are certainly committed to 

that program. 

As far as I can tell—and I would have to defer to the Under Secretary of Defense for Acquisition, Technology, and Logistics, but I 

pay very close attention to this program—it is currently on track. 

Now, as far as the SCMR goes, you know, the deeper you go, the 

tougher some of this gets. And at the BCA levels, you know, it 

could impact that program in terms of timing or what have you. 

And it also would depend a little bit on whether you emphasized 

capacity or capability, in terms of how many you might buy or 

whether you would do the program. 

But, at the moment, we remain committed to that. 

Ms. BORDALLO. Thank you, Admiral. My time is up. But thank 

you very much. 

I yield back. 

The CHAIRMAN. Thank you. 

Mr. Forbes. 

Mr. FORBES. Thank you, Mr. Chairman. 

And, Mr. Secretary, Admiral, thank you so much for your testimony today on the dire consequences of these cuts. 

You know, hindsight is always 20/20. And I would hope that, had 

the President had the benefit of your testimony, he would not have 

began the massive defense cuts that he started when he first came 

into office over 4 years ago. And make no mistake about it: The 

President began these massive defense cuts. 

The second thing I would hope is the President, listening to your 

testimony and in hindsight, would not have suggested sequestration. And make no mistake about it: It was the White House’s suggestion we do sequestration, which, Mr. Secretary, you said was a 

dumb idea. Many of us told them it was a dumb idea then. 
22 

I would hope in hindsight, too, the President, hearing your testimony, would come back and not have signed that into law, which, 

make no mistake about it, the President signed it into law. 

But what concerns me most is not what the President has already done but the fact that we hear over and over it is Congress’ 

problem, but the President has come out even recently and said, 

unless he gets all the increases in spending, all the increases in 

taxes he wants across Government, that he will not support any effort Congress makes to fix this for national defense, no matter how 

reasonable and no matter how sensible. 

So I hope that behind the scenes there will be some folks in the 

Pentagon who are trying to be reasonable voices to suggest to the 

President that that course of action is wrong and perhaps even 

dead-wrong. 

And, Admiral, you mentioned in answering the chairman’s question that budget impacts strategy. Is that a fair statement? 

Admiral WINNEFELD. I think any experienced strategist would 

say that it is a balancing of ends, ways, and means. 

Mr. FORBES. So would it be fair to say, if you have a smaller 

budget, your strategy is going to change, than if you have a larger 

budget? 

Admiral WINNEFELD. You either change the ends of the strategy 

or you accept more risk in executing it. I would say that every 

strategy has a band of risk in it. You would like to be in the lowrisk band of any strategy. But as the resources drift away, you 

start getting into a higher and higher risk area of that strategy. 

And, at some point, you are going to have to change your strategy. 

Mr. FORBES. The reason I say that is because, for the last 4 

years, this committee, the chairman, many of us have been saying 

that the budget was really having an impact on the strategy and 

driving the strategy, but, over and over again, we were hearing 

people from the Pentagon coming over and dipping their hands in 

some sort of mythical bowl and saying, no, no, no, this strategy is 

driving our budget, and the budget is not driving the strategy. So 

I believe, very clearly, many of these cuts have driven our strategy 

and will drive us to a dangerous strategy. 

But let me come back to that hindsight being 20/20. If I look 

back over the last 2, 3 decades, one of the things that I can see 

is that there were some game-changing technologies that took 

place, some of them—stealth technology, unmanned systems, precision-guided munitions. 

I am going to ask you to, kind of, look out to 2040 and take a 

look back. What do you think some of our game-changing technologies would be that maybe we need to fence off and make sure 

we are protecting? 

And one of those, specifically, talk about the Navy’s UCLASS 

[Unmanned Carrier Launched Airborne Surveillance and Strike] 

system. Do you see this as a game-changing technology that will 

define the future of the carrier air wing? 

Admiral WINNEFELD. First of all, I would say there are a number 

of technologies out there that we have to pay attention to, and it 

is why both Under Secretary Carter and I have worked hard to do 

the best we can to protect our ‘‘seed corn,’’ which is our R&D [research and development] budget, you know, science and technology. 
23 

You can’t protect all of it, but it is terribly important that we continue this work. Any company would tell you that in a downturn 

they have to continue their research and development so they can 

come out at the other end with a product that works. And that is 

the same thing for us. 

There are a number of these things. One would be cyber, making 

sure that we are continuing to advance on that front technically, 

as well as training and infrastructure. There are—— 

Mr. FORBES. Admiral, I have 60 seconds. 

Admiral WINNEFELD. Okay. 

Mr. FORBES. Can you tell me about UCLASS? 

Admiral WINNEFELD. The UCLASS, I have been personally driving the requirement on that because I believe in the program. 

In terms of whether it is a game-changer that totally transforms 

warfare, I wouldn’t go so far as to say that, but it is a very important element of what we would put on the flight deck of an aircraft 

carrier in the future. It has a lot of potential capability for us that 

we would want to employ in a more dangerous world. 

Mr. FORBES. Mr. Chairman, thank you, and I yield back. 

The CHAIRMAN. Thank you very much. 

Mr. Loebsack. 

Mr. LOEBSACK. Thank you, Mr. Chair and Ranking Member. 

I want to thank both of you for your service, of course, and for 

being here today. This is a critical hearing, I think, to understanding the long-term impacts that allowing sequestration to continue would have on our men and women in uniform, on our readiness, and, indeed, on our national security. So, again, thank you for 

being here. 

I do believe, as I think everyone on this committee does, and I 

believe very strongly that we have to replace sequestration. And I 

think the hearing today outlines the long-term consequences of sequestration and the, I guess, height of irresponsibility that really 

would be the case if we were to allow sequestration to go on. 

But I have two particular issues I want to address today with 

you. 

First, Secretary Carter, can you outline the impact the scenarios 

explored in the strategy would have on the health of the industrial 

base? And here we are talking about the organic industrial base— 

arsenals, ammunition plants, depots, shipyards, et cetera. 

And, in particular, what would be the impact on the workforce 

within the industrial base, including the civilian workforce? And 

we have already talked furloughs a little bit, but specifically our 

ability to surge capacity when needed to respond to a national security contingency? 

Secretary CARTER. Absolutely. It is a very important matter. 

There will be an impact on the industrial base, organic and the rest 

of our industrial base. I worry about it a great deal as Deputy Secretary. I worried about it a lot more when I was Under Secretary 

of Defense for Acquisition, Technology, and Logistics. 

We, just to take people, employ, as I am sure you know, about 

800,000 civilian employees at the Department of Defense. A lot of 

people in Washington think they are people who get up in the 

house next-door and drive to a building that has a four-letter name 

on it and sit at desks. Not true. Our civilians, for the most part, 
24 

don’t live anywhere near Washington, as you know. And they fix 

things. They fix vehicles, they fix airplanes, and so forth. 

And, as I said earlier, furloughing them is no way to treat people. The only reason that it was safe from a mission point of view 

to furlough depot workers was that we couldn’t afford to do the 

work, so we didn’t have work for them to do—also a consequence 

of sequester. 

Going forward, we are looking at the backlog at each of our depots. As you well know, I am sure, we manage that backlog to create, as best we can, an even workflow. There is no question about 

it that if our budget is cut, we are not going to be able to do as 

much maintenance as we had planned. And those installations will 

be affected, like everything else is affected. We will try to manage 

that in the most intelligent and humane way we possibly can, but 

it is a consequence of lower budgets. 

Mr. LOEBSACK. It is the human effect that we talk about. With 

respect to the furloughs, it is the human effect, when it comes to 

reduced workload and all the rest, but also it is also a national security issue. If we are not keeping the arsenals, for example, warm 

and we have a contingency, it is going to take much longer to get 

those folks back online and make sure that those products are 

available, those things are available for our troops in the event of 

another conflict. 

Secretary CARTER. It is true. Anywhere I see in the industrial 

base what I will call irreversible change—that is, something that 

we are ramping down that we couldn’t re-create—I get worried 

about that. Because things, once you bring them down, once you 

eliminate a skill set, it is very hard to bring that back. 

Mr. LOEBSACK. That is right. 

Secretary CARTER. And so it gets back to what Admiral 

Winnefeld was saying about protecting our future. One of the 

things we try to do is to make sure that we don’t make irreversible 

changes, wherever that is possible for budgetary reasons, so that 

we don’t destroy something that would be very time-consuming and 

expensive to re-create. 

Mr. LOEBSACK. And, Admiral, I think I will take your answer for 

the next question for the record, if we could. We will submit that 

question to you. 

But it has to do, of course, with going into more detail in terms 

of implementation of end-strength reductions as reviewed in the 

strategy and, in particular, looking at total force and the balance 

between Active Duty and Reserve Components. I am almost out of 

time, so I will submit that to you. And if you could get back to us 

in writing, I would appreciate that very much. 

All right, thank you. 

Thank you, Mr. Chair. 

The CHAIRMAN. Thank you. 

Mr. Wilson. 

Mr. WILSON. Thank you, Mr. Chairman. 

And thank you both for being here today. 

I share the concern of Congressman Forbes, and I appreciate 

that you are raising the issue of sequestration. I am very grateful 

that, with the leadership of Chairman Buck McKeon, the House 
25 

voted twice last year to address this issue. We, in our most recent 

budget, voted to address the issue. 

This has a catastrophic effect. When we hear the word ‘‘furlough,’’ the American people need to know what that means. It is 

a 20-percent pay cut. We all know, in running our homes, that we 

have planned mortgage payments, car payments, tuition, and utility costs. And so ‘‘furlough’’ sounds too nice. Twenty-percent pay 

cut. 

This needs to be addressed. And I sincerely hope—I have always 

been concerned that it was, indeed, Secretary Panetta who said, 

this will hollow out the military. So I am very concerned, and I 

hope every effort will be made to address this. Also, reprogramming and to be ever-vigilant in regard to our readiness. 

But having that in mind, this committee has supported the statutory 1.8-percent pay increase. The President had recommended 1 

percent. By September the 1st, there is the potential of the Secretary making a recommendation to the President to reduce the 

pay increase to 1 percent. What will be the recommendation by the 

Secretary? 

And I am also concerned that there was a statement that pay increases have been, ‘‘40 percent above inflation since 2001.’’ Where 

did that figure come from, and how was it calculated? 

Secretary CARTER. Thank you. 

Let me start with the furlough question. I, too, hope that we are 

able to change that. You are right, ‘‘furlough’’ is too nice a word. 

I have talked to too many of our folks who are missing a fifth of 

their pay in the last quarter of the year. That is what it amounts 

to, and that is a real impact on people and their families. And it 

is no way, as I said earlier, no way to treat people who are serving 

their country, too, even though they are civilians. 

And, by the way, I will just mention that more than half of our 

civilian workforce are veterans on top of that. So they are doing it 

because they love the work, because they love the country, and 

they like to be part of defense. It is no way to treat them. 

And thank you and everybody on this committee for supporting 

reprogramming. That is essential for us to try to adjust to this abrupt circumstance. 

With respect to military pay and the rest of compensation, you 

are right, we asked for a slower rate of increase in military pay, 

and Congress did not—Congress denied that. That is an example 

of what I said earlier about we need help if we are going to do this. 

And we will be making proposals in fiscal year 2015. We haven’t 

fully formulated them. In fact, we have asked the Joint Chiefs of 

Staff, in particular, and the senior enlisted leaders of the Department to help us make that decision and make a recommendation 

to the President. But we will be making a recommendation in that 

area. 

The 40-percent number, I am not sure I am familiar with it, but 

I think the number that might be the one you are thinking of is 

the increase, total increase, in real military pay over the period of 

the last decade. That—— 

Mr. WILSON. If you could get—— 

Secretary CARTER. I can certainly get back to you. 
26 

Mr. WILSON [continuing]. Some documentation, I would appreciate it. 

Secretary CARTER. You bet. 

[The information referred to can be found in the Appendix on 

page 105.] 

Mr. WILSON. And then do you anticipate—again, we are here, it 

is August. Will we be—when will we learn about the President’s 

decision relative to the pay increase? 

Secretary CARTER. With respect to the fiscal year 2015 and beyond? 

Mr. WILSON. Yes. 

Secretary CARTER. That will be when he submits his budget, 

which will be in February. 

Mr. WILSON. But, yet, this year, there could be a determination 

of 1.8 to 1 percent. And so what do you anticipate for our service 

members this month? 

Admiral WINNEFELD. If I can weigh in, the President’s budget as 

submitted for the fiscal year 2014 was at 1.0 percent. So that is 

where the position stands. I know that in various committee action 

and the like that that has not been approved; it has been taken at 

1.8. So I think there will be a conferencing at some point where 

that would be determined. 

I would just say that you would think the Joint Chiefs would be 

the last group that would want to slow the rate of compensation, 

but we have taken a very, very hard and close look at this, and we 

are going to have to slow the rate of increase. It is not decreasing 

anybody’s pay; it is slowing the rate of increase. 

But we are going to just run out of money to provide the tools 

that these troopers need to do their job. 

Mr. WILSON. Okay. 

Admiral WINNEFELD. The most important thing for them, the 

most important compensation for them is to come home alive. The 

best way to bring them home alive is to get them the stuff they 

need. 

Mr. WILSON. Well, thank you both. But I truly am concerned that 

we need to show how much we appreciate the young people making 

a difference for our country. 

Thank you. 

The CHAIRMAN. Thank you. 

Ms. Hanabusa. 

Ms. HANABUSA. Thank you, Mr. Chair. 

Secretary Carter, the Secretary of Defense made a public statement yesterday, and I just want to have your confirmation. He said 

that the $487 billion reduction over the next decade is to satisfy 

the initial caps of the BCA. And I have been always asking, what 

is the 487? So it is to satisfy the caps that are contained in the 

BCA; is that correct? 

Secretary CARTER. Correct. 

Ms. HANABUSA. So what we are now talking about, since we 

know that that is taken care of, is the impact of sequestration. 

One of the things that you stated, both of you stated in the 

SCMR is that it is not intended to define the exact compensation 

of, basically, the future forces or what we are going to do. It is sort 

of, I think you used the word, a ‘‘decision space’’ faced by the De-
27 

partment, and it is going to guide you. One of the areas that it is 

also going to guide is in the QDR. And that, of course, is what 

many of us are looking at to see what the view is into the future. 

Now, how does the QDR and what you intend to do with the— 

as you state in the SCMR, because the QDR, of course, comes from 

the Department originally—how is that going to interface with that 

which we have done in terms of the NDAA [National Defense Authorization Act]? 

For example, we have said no BRAC, and one of the proposals 

is a potential BRAC. We have said no civilian furloughs, assuming 

that goes through, and one of the things that is very obvious from 

all of this is that we may be faced with that. 

So can you tell me how we are going to play and what we do with 

the NDAA into not only how you view the SCMR working forward 

but also the QDR? 

Secretary CARTER. Absolutely. The same people who did the 

SCMR, the senior leadership of the Department, will do the QDR, 

so it will be informed by the SCMR. And, of course, we are required 

by law to do a Quadrennial Defense Review. A lot of the work for 

that is, in a sense, already done. And the QDR, on its schedule, 

comes late. We will probably be pretty close to finalizing the next 

budget by that time. 

With respect to pieces of legislation contained in the NDAA, obviously we will abide by the law. Where we think that change is required, we will ask for it. And when we do, we will try to give you 

the whole picture. 

Because I think this was mentioned by Ranking Member Smith 

earlier; when people look at individual pieces of the budget, of 

course you don’t want to cut any of these things. There are real 

people involved. They are doing real work. They wouldn’t be here 

in the first place if they were doing something that was not essential. So it is really hard. But you can’t—we can’t, at least, look at 

things that way. We have to look at the whole picture. And so we 

may indeed come back to you and say, when we have looked at the 

whole picture, we need to take this step. 

I think BRAC is an example of that. We need to do that. We 

need to do it even more when our budget is being reduced more, 

because the excess overhead is even more excess in that circumstance. So we need that authority. Otherwise, we are going to 

end up taking only ‘‘tooth’’ and not ‘‘tail.’’ 

Ms. HANABUSA. I understand that, but, of course, you will also 

face from us, on this side, the fact that the BRACs don’t pencil out 

for maybe 16 years down the road, and the joint basing hasn’t exactly worked the way it has. 

But, in addition to that, on page 13 of your testimony, both of 

you say, ‘‘To meet these severe caps in the long term, the SCMR 

examined two illustrative strategic options.’’ One is basically to 

seek to preserve a modernized force by sacrificing capacity, and one 

to preserve the larger force capacity at the expense of modernization programs. 

So it seems like with both—these are the two options you have 

come down with, but both have an upside and a downside. Are we 

reading this correctly? 

Secretary CARTER. Exactly, yes. 
28 

Ms. HANABUSA. And the last one, I am running out of time, but 

I will submit it and ask you to respond for the record. 

On the follow page, you talk about reducing end strength. And 

it is severe for Army, from 490,000 to between 380,000 and 

450,000; and Marine Corps, from 182,000 to between 150,000 and 

175,000. 

So you seem to be focusing on those two Services; is that correct? 

Secretary CARTER. No, that is not correct. 

Ms. HANABUSA. Okay, so could you respond to me in writing? I 

am out of time. 

Secretary CARTER. Absolutely. Similar changes in every force element were considered—— 

[The information referred to can be found in the Appendix on 

page 105.] 

Ms. HANABUSA. Thank you. 

Secretary CARTER [continuing]. Not just the Army and the Marine Corps. 

Ms. HANABUSA. Thank you. 

Thank you, Mr. Chair. I yield back. 

Mr. WITTMAN. [Presiding.] Thank you, Ms. Hanabusa. 

Dr. Carter, Admiral Winnefeld, thank you so much for joining us. 

We appreciate all that you do. 

I wanted to talk a little bit about the figures that you bring up, 

especially for 2014. I think we have a slide to put up here that puts 

it in perspective about what we are talking about. 

If you look at the slide here, you see that the actions required by Congress to make reductions of about $5 billion get us down to 

$47 billion in 2014. You spoke of about an additional $12 billion 

in the SCMR recommendations that get us down to about $35 billion. That is still a long way short in 2014 to the full $52 billion 

in reductions. 

Can you tell me how we would get to make up the remaining 

portion of that balance? I understand that the step in that first 

year is the most precipitous one. Can you tell me how we would 

get to $52 billion? And would that affect readiness, and, specifically, which readiness accounts it would affect? 

Secretary CARTER. Absolutely, I can. And it will affect readiness. 

What you have to do in these early years under sequestration is 

go where money can be had quickly. And there are some places 

where money can’t be had quickly—for example, military compensation. Even if you wanted to cut that, you can’t do that quickly. If you wanted to reduce the size of the force quickly, you don’t 

save money, because even if you involuntarily separate a service 

member, there is a process for doing that under the law, and you 

end up paying as much as they are leaving to them as you would 

if they had stayed. So you don’t save money that way. 

So how can you save money? You save money by curbing readiness, because you can do it quickly. So you will see readiness 

changes, more severe than in 2013. And I am going to ask Admiral 

Winnefeld in a minute to detail some of that. You will see us taking money out of investment programs, which means we won’t be 

issuing contracts that we had planned to issue to people who are 

building things for us, people who are accomplishing services for 

us. You will see bases that aren’t maintained the way that they 
29 

should be and are planned to be. All of that stuff, which is not good 

government, is not good management, you just have to go where 

the money is. 

And some of this is detailed in our written statement and, in particular, in the letter that we wrote to Senators Levin and Inhofe, 

which is kind of a very—I think it is eight or nine single-spaced 

pages of what we have to do in fiscal year 2014. 

Admiral WINNEFELD. So there are three areas that, the Deputy 

Secretary said, you have to grab the cash wherever you can. And 

we can’t, as he said, easily get people out of the Services, so if you 

want to take it out of the personnel accounts, the only other things 

you can do—and this is what the Services will have to do under 

those numbers. They will stop bringing people into the military. 

They will stop their promotions. And they will stop moving them 

on PCS [Permanent Change of Station] moves. 

So that is one slice of this thing. And you can imagine that bump 

going through the snake over 20 years of a year when you just 

don’t take anybody in. It is very, very harmful to the force. 

Mr. WITTMAN. Right. 

Admiral WINNEFELD. Another one is the modernization programs. You can grab cash there. But, as the Deputy Secretary mentioned earlier, that starts to break programs. We find unit costs of 

JSFs [Joint Strike Fighter] going up. We find, you know, things 

like Nunn-McCurdy violations when that occurs. 

And then, finally, the most important thing to us, of course, is 

readiness. And readiness is the elephant in the room. If you have 

an F–15 [Eagle fighter jet] squadron in your district, a lot of people 

don’t care if it is flying or not, they just want it to be there. And 

that is why they call it a hollow force. It looks good on the outside, 

an F–15 is sitting on the ramp, but they are not flying. 

Mr. WITTMAN. Right. 

Admiral WINNEFELD. And so we will definitely see that very 

harmful effect next year if we have to meet those numbers. 

Mr. WITTMAN. Gotcha. 

Let me ask this. When you talk about those effects on readiness, 

can you qualify for us what that means as far as the risk this Nation assumes, both currently and then potentially if we face another conflict or another instance where we have to deploy somewhere around the world? 

Admiral WINNEFELD. I have a very good classified slide that 

demonstrates that. I have shown it to Chairman McKeon. I would 

be happy to show it to any Member. 

But it outlines basically the supply side. It shows you how many 

forces you have and the readiness state of those forces. And on the 

right side, it shows the demand side. And that demand side, it is 

what we are actually using day-to-day today—forward presence, 

you know, what we are doing in the Arabian Gulf and Korea, that 

sort of thing. And then it shows what the demand signal could be 

for various contingencies. And it is not a pretty story, but I can’t 

go into it in an unclassified environment. 

Mr. WITTMAN. Can you just give us a very brief, one-sentence assessment about what that increased risk means to the men and 

women that serve this Nation and put themselves in harm’s way? 
30 

Admiral WINNEFELD. Well, one thing it means is that if you did 

have to do a contingency and you ended up deploying forces that 

are not ready, you know, that is something we don’t like to do. One 

of, we believe, the most important ways to not break faith with our 

people is to make sure that when we send them into harm’s way 

that they are fully ready to fight. 

Mr. WITTMAN. Gotcha. 

Admiral WINNEFELD. And we would not want to be in a position 

where we had to violate that. 

Mr. WITTMAN. And if perchance they were not ready to fight, 

does that mean more men and women die on the battlefield? 

Admiral WINNEFELD. Either that or we don’t go into the contingency. 

Mr. WITTMAN. Gotcha. Very good. 

Thank you, gentlemen. We appreciate it. 

Mr. Barber. 

Mr. BARBER. Thank you, Mr. Chairman. 

In regard to your last question and the response, I just took a 

meeting a few minutes ago with the upcoming commander of the 

12th Air Force at Davis-Monthan Air Force Base. And he was talking about having to stand down pilot training for 3 months. And 

I asked him what the ratio of standing down to lack of readiness 

looked like. He said it is at least two to one. You know, 3 months 

down, you got to have 6 months to get back up to speed. So we are 

already doing irreparable harm, I believe, to our readiness by having to take these actions. 

I want to talk about something a little bit different in regard to 

how sequestration is affecting our current and future force. I think 

Chairman McKeon stated it quite well when he said that, within 

this committee, there is an acute awareness of what this is doing 

to us, but with our colleagues who are also facing their challenges 

in other committees, not so much; in fact, in many cases, not at all. 

And across the country, the American people really don’t get this 

yet. But our regional commanders know, as do our local commanders. And they cite all the time the adverse consequences that 

sequestration is having on morale and is having an effect, morale 

effect, also on military spouses and families. 

You know, I grew up in an Air Force family. We never saw anything like this, indiscriminate cuts that just absolutely make no 

sense. And so I have no personal experience with it. But over the 

last several weeks and months, I have met with a lot of families 

and military men and women at Fort Huachuca in Arizona, at 

Davis-Monthan at the 162nd Air National Guard. And almost to a 

person, they reflect that morale is really declining. And then I talk 

to businesses in those communities, and they are affected, obviously, by the lower buying power. People don’t want to buy things 

when there is uncertainty. 

So I just want to ask this question, Mr. Secretary. Given the 

current fiscal constraints and the negative impact that sequestration is having on morale of both service members and their families, how will the military—and I think we also know that our service members are often some our best assets when it comes to 

recruitment. 
31 

How is the Department ensuring that recruitment to meet our 

future needs is being sustained in a time like this? I mean, surely, 

it has to have had an effect or an anticipated effect. 

Secretary CARTER. Well, we are monitoring that very carefully. 

We count on having the best people of any military in the world. 

And since it is an All-Volunteer Force, we have to look at the labor 

markets and see, are we going to be able to recruit and retain the 

kind of people we need? 

We are doing okay so far. I think the morale change might have 

an effect on us, and we are watching that. So, also, does the overall 

economic situation, the labor markets in general. 

And so, also, as far as retention is concerned, is the quality of 

service life. If you joined because you want to be tip-top in your 

military profession and you are not allowed to train this year, you 

are just allowed to sit around, because we don’t have the money to 

let you train, that is very dispiriting for people, and that is the 

kind of thing that will make them leave. So I am very concerned 

about that. 

This is something that is so concerning to us that we watch it 

very closely. It is very concerning to me. But I want to ask Admiral 

Winnefeld if he has anything to add to that, because this is something that really cuts to the heart for us. 

Admiral WINNEFELD. Sir, I think you are asking a very good 

question, because, as the Deputy says, at the moment, perhaps because of the job market, what have you, we are doing okay in recruiting and retentionwise. 

But it is a complex animal, and there is no question in our mind 

that, as the readiness of the force declines, that these people aren’t 

going to be doing what they came in to do, and they are going to 

be less inclined to stay. Some of them will stay anyway, but there 

will be less inclination to stick around. 

And the real morale piece—I wouldn’t say the morale of the force 

is terrible right now. Our young men and women are doing great. 

But this has introduced a level of uncertainty in their lives as to 

whether they are going to have a future. 

And sometimes I will talk to audiences, and I look at them and 

I will say, look to your left and look to your right. If we can’t agree 

that we can absorb a slower rate of increase of compensation, then 

one of you guys is going to be gone in a couple years, assuming we 

are allowed to do that. So there is some uncertainty out there in 

their lives. 

Mr. BARBER. Well, let me just comment, in my remaining time, 

in regard to my earlier conversation with the General. He has told 

me that re-upping is also becoming a problem. Men and women 

who are trained to fly potentially an F–22 [Raptor fighter jet] are 

saying they don’t want to continue. That is a tremendous impact, 

negative impact, on our future readiness. 

And I appreciate all you are doing to try to make us manage this 

through. I hope Congress will come to its senses and find a better 

way. Thank you. 

Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. [Presiding.] Thank you. 

Mr. Scott. 

Mr. SCOTT. Thank you, Mr. Chairman. 
32 

Admiral, thank you for your service. Most of my questions will 

be for Dr. Carter, simply because of the two bases that I represent, 

but I certainly appreciate your service. 

And, Dr. Carter, I represent Robins Air Force Base, and I also 

represent Moody Air Force Base in Valdosta. And, obviously, the 

furloughs are of great concern to us. And I appreciate your comments in that—I believe I have your quote right—that you wouldn’t 

furlough anybody if you had your choice and that you are hoping 

to adjust from 11 days down. 

Secretary CARTER. Correct. 

Mr. SCOTT. And I hope that we will know soon what that is. Because I will tell you, a 20-percent pay cut for the men and women 

that are out there working to make sure that our warfighters have 

the equipment that they need when they go into battle is doing a 

lot of damage to the morale and, quite honestly, I think, is extremely inefficient. 

And I want to ask you a couple of questions about the organic 

depots, if I could, and the impact of the furloughs and the efficiencies and the competitiveness of our depots as we go forward 

and we start to compete for new business as that backlog is 

created. 

Furloughs were mandated across the board. I didn’t support the 

sequester, didn’t support the furloughs. I offered alternatives that 

had flexibility in it, as you suggested. There is no business case 

analysis that suggests that the furloughs help in any way, shape, 

or form long-term. But they are creating inefficiencies and they are 

creating deferred maintenance, and that makes our depots less efficient and increases the cost per unit. 

And my question is, what adjustments will be made to compensate for things that are being done because of Washington, not 

because of the men and women at the depot, as we go forward to 

compete for that business, to try to get it into the organic depots? 

Secretary CARTER. Your analysis is absolutely right, both as regards the effect on the efficiency of those installations and, most 

importantly, as regards the people. 

And in this, as in everything else that we have had to do in fiscal 

year 2013, it has effects. Even if sequestration goes away, we are 

going to be living with the residue of what happened in fiscal year 

2013 for a while, in readiness, in depots, in all kind of ways. 

For the depots, as we go into 2014, we are looking at the backlog 

at each of the depots and trying to manage that to a reasonable 

level. If the backlog falls too low, then if there is a further budget 

reduction, it risks layoffs, which we don’t want. So we want the 

workload to be managed above a level where it risks that. On the 

other hand, we don’t want it too high either. So, at each of those, 

the relevant service is trying to manage the backlog in a smart way 

in view of what is happening in sequestration. 

We will have to see what happens in 2014 and manage the workload accordingly. We won’t be able to afford to do all of the maintenance that we had planned to do before the Budget Control Act, no 

question about it. And that will have a long-term effect on each of 

our facilities, as it has on all of the extramural maintenance companies also. 
33 

Mr. SCOTT. But just to recap, you do agree that the furloughs 

that are occurring at the depots are creating artificial inefficiencies, 

that when we go to compete for the business in the future, we simply want to make sure that that playing field is leveled so that we 

are judged based on our capacity without the damaging things that 

Washington has done. 

Secretary CARTER. I understand exactly what you are saying, 

yes. 

Mr. SCOTT. One last question I have with regard to the furloughs 

and maintenance. Has there been consideration into more joint 

depot work, where Air Force depots would be able to compete for 

Navy business, for example? 

Secretary CARTER. Yes, there is. And that is an important source 

of efficiency. There has been some opposition to that, but it is more 

efficient. 

Let’s take helicopter engines. A lot of helicopter-type model series 

are multiservice; different Services maintain those helicopters. 

Why not have one place where a certain model of helicopter is 

maintained? 

We are looking at that. That is a move we should make and I 

hope we get the flexibility to make. 

Mr. SCOTT. One final question real quick, just as to the choices. 

One concern that I hear from some of our people with regard to 

readiness is that the choices—I mean, we are going to continue to 

fly the Thunderbirds, it appears. And just from the standpoint of 

putting that as a priority above combat readiness, could you speak 

to that very quickly? 

I know I am out of time, Mr. Chairman. 

Secretary CARTER. Yes. And let me ask Admiral Winnefeld to 

speak to that also. 

The particular matter of the Thunderbirds flying is they are not 

flying in order to make shows. They are flying in order to keep the 

proficiency of those pilots, who are also pilots who are part of forces 

that would participate in operations plans if there was a crisis 

around the world. So it is incidental that they are members of the 

Thunderbirds. 

Sandy, do you want to say any more about that? 

Admiral WINNEFELD. Just very briefly, because I know the chairman wants to get moving. 

They are flying at a low, very low, restorable proficiency that, if 

we are able to get money next year, would cause their on-ramp to 

actual readiness to be more shallow. And as the Deputy points out 

correctly, they are deployable as a warfighting contribution if they 

need to be. 

Mr. SCOTT. Thank you, sir. Thank you for your service. 

The CHAIRMAN. Thank you. 

Ms. Duckworth. 

Ms. DUCKWORTH. Thank you, Mr. Chairman. 

Mr. Secretary, it is good to have you here. 

And, certainly, we have the power to end sequestration. We 

should end it. That would take away a lot of the problems that we 

are facing right now, although it does not solve a lot of the longterm problems. 
34 

I want to go back to the discussion on the reductions to end 

strength and specifically with the Reserve forces, both the Reserves 

and the National Guard. Could you address where this is going to 

go underneath some of the proposals that you have in terms of end 

strength for the National Guard, the proficiency, the training? 

You know, I don’t want that hollow force. I don’t have any bases 

in my district, but I certainly want the National Guard to not just 

be sitting there with pretty aircraft on the tarmac and nobody proficient to fly them. 

So could you speak a little bit to maintenance of the operational 

force and the Guard? 

Secretary CARTER. I will. And then, again, I will ask Admiral 

Winnefeld if he wants to add to it. 

I mean, first of all, the whole Reserve Component, Guard and 

Reserves, have made an enormous contribution over the last 10 

years. They have been necessary because of the length of the Iraq 

war and the Afghanistan war. So we have had to call upon them, 

and they have answered the call. 

But the Reserve Component, like all the rest of everything we do 

in defense, is going to have to accept some of the reductions. And 

I think what is important is that each and every Guard or Reserve 

unit have a mission that is clear to them and clearly needed either 

by us or for the Guard for defense support to civil authorities, in 

particular the States, in an emergency. 

And, in that connection, we are beginning just this year—in fact, 

I have a meeting on it this afternoon—to have a way of defining 

the requirements for the Guard, defense support to civil authorities. We have never done that in 250 years of having a National 

Guard, defined requirements for what they need to do for the 

States, the way we have requirements defined for the Pacific Command, the Northern Command, the Central Command, and so 

forth. We are just beginning that now. That will give a lot more 

clarity to the future need for and size of and composition of our 

Guard and Reserve force. 

We took a first look at that in the SCMR. I would say it was a 

good, solid look, but we are trying to refine that through the process I just described. 

And let me ask Admiral Winnefeld if he wants to add anything 

about the Reserve Component. 

Admiral WINNEFELD. I would simply reiterate what the Deputy 

Secretary said about the value of the Guard and Reserve. They 

have been tremendously important as a component of the entire 

DOD and we very much value them. 

As the sequester cuts occur, depending upon the depth, if it is 

the full sequester, what have you, the entire business is going to 

have to come down, to include the Guard and Reserve along with 

the Active. 

I don’t want to speak for the service chiefs, but I know that General Welsh and General Odierno are very concerned about this. 

They are paying very close attention to it. Having spoken to General Odierno—and I don’t want to put words in his mouth—I know 

he would likely—and probably Secretary McHugh, I think, is along 

with him, but I haven’t spoken to him—bring the Active Component down at a larger rate than the Guard. But that remains to 
35 

be seen, depending on what the Services come in with their budget 

submissions. 

But make no mistake that we value the contributions of the 

Guard and Reserve. 

Ms. DUCKWORTH. Mr. Secretary, so in your meeting later today 

talking about what the requirements are for defense support of 

civil authorities, are the Governors going to have any say in this 

meeting? 

Secretary CARTER. That is what is really novel about this process. For the first time, we will have the TAGs [The Adjutants General] representing the Governors. And I will then meet with the 

Governors, as I have done now several times over the last few 

years on this very subject, because I know it is a difficult thing. 

This is an area where we, at the Federal level, provide and pay for 

something that the Governors then use. That has an issue of federalism in it, and we need to resolve it in a thoughtful way. 

And having seen the chaos of 2 years ago when we began making 

budget changes in the Air National Guard, I think we need to do 

better than that. We need to have a clear sense of what the Governors need and what the role of the Guard is in that capacity. And 

then the Guard and Reserve also play a role, if mobilized, in foreign conflict, as well. And we need to define all that. 

Ms. DUCKWORTH. Thank you. I am out of time. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Mr. Franks. 

Mr. FRANKS. Well, thank you, Mr. Chairman. 

And thank both of you for being here. There is certainly a great 

deal of respect on this side of the room for both of you. 

And, Admiral Winnefeld, if it is all right, I will start with you, 

sir. You know, in the debate in this House, sometimes there are 

things that are—the function of the debate is a political oneupmanship, and then sometimes there is really the sincere commitment to try to do the right thing, and sometimes there is an amalgamation of both. And so I am going to ask you a question that has 

a political dimension to it, and I don’t ask to you address that at 

all. Just an honest, professional military point of view, even though 

the question will become obvious. 

In your best professional military judgment, would there be 

greater risk to this country’s ability to meet our current national 

security commitments under sequestration or under the funding 

approved by the House in its budget deliberations, which would restore the $52 billion cut in national defense in fiscal year 2014? 

Admiral WINNEFELD. Well, sir, if you are asking me whether I 

think we would be able to meet our commitments under a $52-billion cut or no $52-billion cut, I would have to answer that we 

would be a lot more likely to meet them under the ‘‘no $52 billion 

cut.’’ So I would—— 

Mr. FRANKS. I hated to put you through that exercise, but I appreciate you answering honestly. And that is—I am not shocked at 

it, but oftentimes—I know sometimes civilian command structure 

makes it difficult to do that. So I appreciate that, Admiral, and appreciate your commitment to the cause of defending this country. 
36 

Dr. Carter, I have had the privilege of spending the last 11 years 

in Congress on the Strategic Forces Subcommittee, focusing on our 

strategic nuclear deterrence and our homeland missile defense apparatus. And you may recall saying in a recent speech at the Aspen 

Security Forum—I will just quote it. It says, ‘‘You may all be surprised to know that nuclear weapons don’t actually cost that much. 

Our annual spending for nuclear delivery systems is about $12 billion per year. This is out of around $525 billion, and so it is not 

a big swinger of the budget. You don’t save a lot of money by having arms control and so forth.’’ 

And just for the record, I couldn’t possibly agree with you more. 

But tell me, if you would, your conclusions related to the SCMR, 

what conclusions it came to in regard to our nuclear deterrence as 

well as our missile defense capabilities. 

Secretary CARTER. Absolutely. And for the record, I want to associate myself with the Vice Chairman. I will take the $52 billion, 

too. 

Mr. FRANKS. You think the $52 billion would help. 

Secretary CARTER. Yes. 

Mr. FRANKS. Okay, we have established that. Yes, sir. 

Secretary CARTER. With respect to the cost of nuclear forces, 

what I said in Aspen was that we, this year, protected the operations of the nuclear forces under sequester. We did not want to 

not send nuclear submarines to sea, not have our missiles on alert. 

We didn’t want to do that, so we protected that. Obviously, that 

pushed sequester off onto other accounts. But it, like the war in Afghanistan and a few other things, we protected because it is so important to our security. 

The point about cost is this: The SCMR looked at nuclear forces, 

but the point I was making was and the way I said it in Aspen was 

nuclear weapons deserve our deepest respect and constant attention because of the awesome, destructive power that they have. 

However, they are not a big swinger in our budget. That is just a 

fact. 

Mr. FRANKS. Yep. 

Secretary CARTER. And so, as we go forward, we will make decisions about nuclear forces on the basis of a lot of factors, but budget will not seriously drive the composition of the nuclear forces. 

They are just not a huge part of the budget. 

Many of you, of course, understand that, but many people don’t 

realize. They think that they are a large part of our budget. In fact, 

they are not. But they are, obviously, very important. 

Mr. FRANKS. Yeah. Well, and I appreciate you making that clear, 

because, as you know, as you say, most folks, it is just one of those 

things that we don’t have in the forefront of our consciousness, that 

while they represent the pivot of most of our capability in the 

foundational sense, they are not the cost factor that some think 

they are. 

So let me try to get one last question in. In the overall conclusions of the SCMR, let me ask you if you can articulate—and I will 

ask both of you, because my time is just about gone here—what are 

the things that you think are most significant that we can’t do 

under the conclusions that you have come to, those things that you 
37 

think that are most important that we can’t do that we should be 

able to do and we should focus on as a committee and a country? 

The CHAIRMAN. The gentleman’s time has expired. Can you 

please take those responses for the record? 

Secretary CARTER. Absolutely. 

[The information referred to can be found in the Appendix on 

page 106.] 

The CHAIRMAN. Thank you. 

Mr. Cooper. 

Mr. COOPER. Thank you, Mr. Chairman. I had almost given up 

hope here. 

I appreciate the witnesses. 

I just wanted to make an announcement that, in an effort to be 

constructive, Congressman Paul Ryan and I have introduced today 

a bill that would give the Pentagon complete flexibility in making 

spending decisions. Now, we would not reduce the extreme diet 

that you are on. And I personally would like to, you know, 

eliminate sequestration entirely. But at least we want to give you 

flexibility. 

Now, this has been an unduly controversial issue on the committee, as the chairman knows. I introduced such an amendment 

during the markup. It passed by a voice vote. But then when a recorded vote was called, people put on their team jerseys again, and 

it turned out that both parties were against flexibility. 

So I don’t know how far this bill will go, but I hope that more 

Members of Congress and even more members of this committee— 

because this has not been the best attended of our hearings—will 

pay attention to the extraordinary upheaval that is going on in the 

Department of Defense right now as a result of our own actions. 

This is not a foreign threat; this is a self-inflicted wound. And Congress needs to behave much, much better when it comes to funding 

our military priorities. 

So I am not asking our witnesses to comment and get in trouble, 

because you are always reluctant to bite the hand that feeds you. 

Now you are even reluctant to bite the hand that is not feeding 

you. It is a crazy situation that you have been put in. But we on 

this side need to be doing a much better job. 

So I thank the chairman. Yield back the balance of my time. 

The CHAIRMAN. Thank you. 

Mr. Nugent. 

Mr. NUGENT. Thank you, Mr. Chairman. 

And I certainly do appreciate your service, both of you, to this 

country. 

And I guess one of the—and this is not directed to you, just a 

comment. As our Commander in Chief, you would think, as we 

move forward, particularly when we talk about at least turning off 

the sequester as it relates to our Department of Defense—which, 

without it, we have no freedom or security. 

And so, you know, as we move forward, you heard it already, about the $52 billion, the President has come out and, you know, 

issued a veto threat in regards to that, which is unfortunate because that takes away the dialogue that you could have in regards 

to the rest of sequestration and what it is doing to the country but, 

more importantly, what it is doing to our national security. 
38 

You know, having three sons that currently serve, I hear firsthand the effects of sequestration in regards to training and readiness, but they are good troopers. You know, they stand ready to 

serve. They stand ready to protect this country. But it is disheartening, as a dad, to hear them because their mom and I worry. 

When we have had them deployed to Afghanistan and Iraq, we 

knew that they were the best-trained, best-equipped force and they 

had a good opportunity to come home. By the grace of God, they 

did. But now I am worried about the effects of sequestration and 

a Commander in Chief that says the right things but doesn’t 

necessarily do the right things, particularly as it relates to our 

military. 

You have talked about retention. I think that should be a huge 

issue for you in the armed services. Because we have one of the 

best-trained groups right now. They have experience in combat, 

which is not something you can teach. 

How do you see a way forward to retain those that have served 

their country? I mean, how do we do that in sequestration without 

just, you know, RIF’ing just rafts of folks? 

Secretary CARTER. Well, I think one of the tragedies of sequestration is that there will be people who, if sequestration continues, 

who joined to serve, who have served honorably, and whom we 

won’t be able to afford to retain. That is a reality and a tragedy. 

And to get back to something that—— 

Mr. NUGENT. But, I mean, did we not learn from the Vietnam 

era, when we went through the same issues of RIF’ing people, that 

it is so difficult to train that? I mean, it is almost impossible to 

train that experience. 

And are there other areas that we could look to instead of always 

looking at personnel? And I know it is a huge part. I ran an agency. It is the largest, typically, the largest part of your budget. But, 

you know, you talk about modernization and making—it is either 

modernization or a larger force. Is there an in-between that we can 

reach if we can’t get the President to work with us on sequestration as it relates to the military in particular? 

Secretary CARTER. Well, we are going to try to make the most 

balanced approach we can to those cuts if we have sequestration 

in fiscal year 2014. 

But the reality is—and this gets back to what Congressman Cooper was saying about flexibility. Flexibility doesn’t help us that 

much, because we have to go where we can go and get money in 

the near term. And there is much of the defense budget that we 

cannot access in the near term. That is why we end up doing ruinous things to readiness, for example, because those are accounts we 

can get our hands on. So flexibility in that sense doesn’t help us 

much. 

The kind of flexibility we need is the kind, as we indicated earlier and the SCMR shows, we need flexibility in time and we need 

the—— 

Mr. NUGENT. Not—— 

Secretary CARTER [continuing]. Latitude to do things like 

BRAC—— 

Mr. NUGENT. Not to cut you off, but I have—— 

Secretary CARTER [continuing]. And so forth that—— 
39 

Mr. NUGENT [continuing]. 19 seconds. 

One last question. When we are talking about CENTCOM [Central Command] and SOCOM [Special Operations Command], the 

Secretary talked about reductions in force there. CENTCOM already had talked about reducing that force by 1,500 in 2014. The 

additional reductions that the Secretary talks about, is that on top 

of that number? 

The CHAIRMAN. The gentleman’s time has expired. Can you 

please take that one for the record? 

[The information referred to can be found in the Appendix on 

page 106.] 

Mr. NUGENT. Thank you. I appreciate it. 

The CHAIRMAN. Thank you. 

Mr. Cook. 

Mr. COOK. Thank you, Mr. Chair. 

I know some of this has been addressed, but I quickly want to 

go over this again. And this is about readiness and training and 

everything like that. 

And it seems as though we dance around this over and over 

again, but the—and correct me if I am wrong in the way I am getting this, but the bottom line is that, basically, what we are ending 

up with is all the units are C–4, not combat-ready, not deployable. 

And it is like, I don’t know, maybe it is just my impression that 

we are almost afraid to come out and say that. And, yes, it is because of the sequester and other things, but the bottom line is, you 

know, somebody who has been an infantryman and everything— 

and that is, like, the worst thing that can happen to a unit, is to 

be a C–4 or not combat-ready. 

And that is what we are. And you have just added to that argument by talking—and it is not your fault; it is our fault. Because 

of the depots, about all the gear we still have in Afghanistan that 

we still have to get back, that they are going to probably have to 

drag it out of there; it is not going to be running. And yet we are 

supposed to meet all these contingencies. 

And if you can comment on that. If you already have, I ask for 

your patience in addressing this. Thank you. 

Admiral WINNEFELD. No, it is a very, very important and good 

question. 

One of the frustrations we have in articulating this precisely is 

that, if you articulate it precisely, it is classified. So you would be 

telling an adversary, you know, where you are. So we have been 

speaking out, though. We have been saying, hey, we are getting 

hollow, we are losing readiness, we have grounded nine fighter 

squadrons. Fortunately, thanks to the reprogramming action by 

Congress, they are back flying at a very low level again. But, you 

know, if we get into specifics, we are telling the bad guys where 

we are. 

So I share your frustration. And believe me, that is part of the 

contribution to hollowness, is not being able to talk about it precisely in public. 

Mr. COOK. No, I agree with you. But, yet, you know, everybody 

who watches this hearing here has got to hear the same things 

that everyone, when we hear these doom and gloom reports. And, 

of course, the old unit rep FORSTAT [Force Status and Identity 
40 

Report] reports, some of them were classified, some of them 

weren’t. 

But in terms of all the contingencies, you know, all the op plans 

and everything else, it is like, God, you got to just wrap them up 

and put them—because we can’t basically carry out any of them. 

And I don’t know whether I am speaking in a classified mode or 

not, but I think it is something that everybody in the world knows 

right now, and it is sending a bad signal. 

You talked about, yeah, maybe we got the nukes, but in terms 

of conventional warfare right now, God, if the Members of the Congress and the public don’t get it, this is the most serious threat 

that I think we face. 

But I have one more question before we run out of time, and this 

is about one of the comments made about the Secretary has asked 

Secretary Carter to identify an individual from outside the Department who is deeply knowledgeable about the defense enterprise 

and eminently qualified to direct implementation of the OSD [Office of the Secretary of Defense] reductions and report directly to 

the Deputy Secretary. 

This kind of scares me, about this person who, he or she, right 

after they solve world peace, they are going to solve this mess and 

be the guru on how we are going to—so can you comment on where 

we are going to find this messiah that is going to straighten us 

out? 

Thank you. 

Secretary CARTER. I don’t think it will be a messiah, but we do 

need to reduce the size of the Office of the Secretary of Defense. 

The Secretary feels strongly about that; I feel strongly about that. 

We can’t ask people all over the country and our military people 

and civilian employees all over the world to make sacrifices if we 

are not willing to make sacrifices ourselves. So what this is about 

is showing the way. 

And Sandy has a great expression that he always tells me, which 

is, ‘‘the pig won’t slaughter itself.’’ And applied to OSD, not that 

they are bad people or anything, but I can’t staff out the reduction 

of that organization. And so I am going to have someone to come 

in to advise me and the Secretary—we will make the final decisions—on how we can streamline the Office of the Secretary of 

Defense. 

It is just a reasonable thing that I can’t go to my staff, which is 

the Office of the Secretary of Defense, and say, how would you 

streamline the Office of the Secretary of Defense? I won’t get a 

good answer. I will put them in a bad position. So I am going 

to get somebody who knows enough about the Department and 

management—— 

Mr. COOK. Yeah—— 

Secretary CARTER [continuing]. To advise us, and that is how we 

will make those decisions. 

Mr. COOK. Yeah, I am running out of time. I just want to thank 

you very much for—it has been a long day. And I wasn’t trying to 

put you on the spot about whether it is classified. But we do dance 

around that, and I think everybody knows the answer already. 

Thank you. 

The CHAIRMAN. Thank you. 
41 

Mr. Smith. 

Mr. SMITH. I just have a couple of comments based on some of 

the questions that transpired. 

I mean, first of all, on the flexibility point, if sequestration happens, I really want to underscore what Dr. Carter said, flexibility 

has very, very limited benefit. And I worry a little bit that this has 

sort of taken on a life of its own, as if this would be a solution to 

the problem. And I really thank you for pointing out the limitations 

on what you can cut where. 

If you have to take these $52-billion cuts every year going 

outward, no flexibility in the world is really going to fundamentally change the dire scenarios that you laid out. We need to end 

sequestration. 

Secretary CARTER. Right. 

Mr. SMITH. The second thing I would like to point out, regrettably, Admiral Winnefeld, you don’t have the $52 billion that Representative Franks made you think you had, because the defense 

appropriations bill that was passed does have $52 billion more in 

it than sequestration would allow, but it does not change sequestration law. 

So, yes, if we can imagine a world where this appropriation bill 

exists independent of sequestration, then it is all good. We passed 

our DOD authorization bill based on that same premise. 

The trouble is, as you have heard today and as you have witnessed, nothing is on the table to stop sequestration. So you pass 

this lovely appropriations bill, and then you come in, you cut $52 

billion out of it. It doesn’t really change the equation much. 

And, lastly—and this is the most political point I will make, so 

I apologize a little bit in advance. But it is really just in response 

to Mr. Forbes’ comment that somehow sequestration was all the 

President’s idea and why on earth did he have such a dumb idea 

and why has he put us in this place. It is an interesting selective 

amnesia. But the reason for sequestration was because of the 

House Republicans’ refusal to raise the debt ceiling. 

So, basically, if the President had vetoed that bill—and I voted 

against it, but I have enormous sympathy for the people who voted 

for it—if the President had vetoed that bill, we would have 

breached the debt ceiling and been unable to pay a good many of 

our bills and probably collapsed our economy. Sequestration was 

only forced upon us because of the refusal to raise the debt ceiling. 

And this is not just sort of a historical point, as we drift toward 

another option of raising the debt ceiling. I hope people will remember that outcome as we get close to the debt-ceiling issue and 

simply raise it. Once we have incurred the debt, once we have 

passed the spending bills, once we have passed the tax cuts, to 

then come along and say, oh, gosh, really, we don’t want to pay 

those bills, is just wrong. 

If you want to do something about the debt, you know, increase 

taxes, cut spending, put something on the table. But don’t once 

again take our country to the brink of not raising the debt ceiling 

so that we can pay our bills. 

What we see before us, what we have heard for the last 2-plus 

hours is directly as a result of the brinksmanship over the debt 
42 

ceiling that happened in the summer of 2011. And I just don’t want 

people to forget that as we go into another series of budget fights. 

I thank the chairman for his indulgence. I yield back. 

The CHAIRMAN. I will expound a little bit upon what the ranking 

member just said. 

I think many times when we go out and respond to our constituents, we can talk about a vote, and they don’t always understand 

that a vote may be containing several different items. It is not one 

item and a ‘‘yes’’ or ‘‘no’’ vote. 

That particular vote on the Budget Control Act, the very first 

thing it did was raise the debt-ceiling limit. Then it also cut about 

a trillion dollars, half of which came out of defense and half came 

out of other domestic spending. 

Then it set up a ‘‘super committee’’ [Joint Select Committee on 

Deficit Reduction] that was supposed to find an additional trillion 

dollars in savings out of mandatory programs. We all know now 

the history of that. They were unable to do that, so sequestration 

did kick in. And that trillion dollars, instead of being taken out of 

mandatory programs, which are the real driver in all of this—because if we eliminated all domestic spending, we would still be running a deficit of over a half-trillion dollars. And that comes out of 

the mandatory side that we have no vote on and really needs to 

be addressed. 

So the sequestration kicked in, and that took another half-trillion dollars, $500 billion, out of defense on top of the $487 billion and 

the part of the $100 billion that was done earlier under Secretary 

Gates that came out of defense also. So it has been a culminating 

effect. 

And the gentleman is absolutely correct; we will face on September 30th a very important decision about moving forward. Probably half of the Congress now does not know what regular order 

is like. They have never had it. 

You have never had in your—like you said, you were sworn in 

on the day we voted for that fateful bill. So none of the members 

of the Joint Chiefs have ever served under a regular budget. 

I don’t think the Senate has passed an appropriation bill since 

2009. They did pass a budget this year, although it is so far different from the House budget that there is no way to reconcile the 

numbers. And we have become pretty dysfunctional as a Congress. 

It is unfortunate, but some way, at some point, we need to get our 

act together and get something done. 

I do have one final question. Title 10 of U.S. Code codifies the 

permanent requirement for an independent panel to review the 

QDR process—and we have talked earlier about the QDR—and 

also provide alternative assessments. The law provides that the 

panel may request whatever information they require from the Department, DOD, to conduct their work. 

Given that last year’s QDR is expected to be heavily informed by 

the SCMR, to what extent do you intend to make available to the 

NDP [National Defense Plan] the proceedings or conclusions of the 

SCMR? You will give them the same support that you give to the 

QDR? 

Secretary CARTER. Yes, absolutely. We were very pleased and fortunate that former Secretary Perry and General John Abizaid have 
43 

agreed to chair that panel. They will get all the information they 

want for their deliberations, including the SCMR. 

The CHAIRMAN. Great. They did an outstanding job last time. 

The members of the NDP were required by law to be appointed 

by February 1st. We have appointed ours. The remaining members 

have been appointed. The Secretary has yet to appoint his cochairs. Do you know the reason for that delay? 

Secretary CARTER. I will get back to you on that. 

[The information referred to can be found in the Appendix on 

page 105.] 

The CHAIRMAN. Okay. 

And now that the SCMR is over—and maybe that was taking the 

time—I would like to ask that the Secretary comply with the law 

and get the NDP operational as soon as possible. So if you could 

carry that message back. 

Secretary CARTER. Will do. 

The CHAIRMAN. Thank you very much. 

Anything else? 

Mr. SMITH. No. 

The CHAIRMAN. No further questions. 

Thank you very much for your time, your patience, and your willingness to answer our questions. 

This hearing is adjourned. 

[Whereupon, at 12:25 p.m., the committee was adjourned.] 

A P P E N D I X 

AUGUST 1, 2013 

PREPARED STATEMENTS SUBMITTED FOR THE RECORD 

AUGUST 1, 2013 

(49) 

Statement of Hon. Howard P. ‘‘Buck’’ McKeon 

Chairman, House Committee on Armed Services 

Hearing on 

Initial Conclusions Formed by the Defense Strategic 

Choices and Management Review 

August 1, 2013 

This committee has frequently encouraged the Pentagon to fully 

plan for sequestration, and to make the consequences of several 

rounds of budget cuts known. With that in mind, I welcome this 

review and what it seeks to achieve. 

I note that the President has directed the Department to maintain his 2012 defense strategy, even though his senior commanders 

have testified that the strategy would have to be revised in the face 

of additional budget cuts. Any further consideration of strategy has 

been deferred to the Quadrennial Defense Review, which will not 

report out until next February at the earliest. In the meantime, the 

review makes clear that the Department will proceed with changes 

in force structure, compensation, and further efficiencies without a 

new strategy. The most optimistic scenario has the President requiring DOD to find another $150 billion on top of the $487 billion 

that has already been cut. To make matters worse, even if all of 

the options in this report were adopted, it would only address 10% 

of the true budget shortfall in the next year or two. The math simply does not add up. 

This review also makes clear what I have been warning about for 

over 2 years. Further cuts will cause catastrophic readiness shortfalls, we will lose our workforce and ability to recruit and retain 

the All-Volunteer Force, and our influence around the world will 

continue to diminish. 

There is agreement on both sides of the aisle and both sides of 

the Potomac that these cuts embolden our enemies and jeopardize 

U.S. national security. We often talk of risk, but I hope that today 

we will have a frank discussion about how this funding profile for 

defense limits the ability of this country to protect our national security interests—not simply that we are accepting more risk, but 

what that means for the Nation and our men and women in uniform. I look forward to hearing the testimony and thank both of 

our witnesses for being here. 
50 

Statement of Hon. Adam Smith 

Ranking Member, House Committee on Armed Services 

Hearing on 

Initial Conclusions Formed by the Defense Strategic 

Choices and Management Review 

August 1, 2013 

I would like to thank our witnesses for appearing before us 

today. You have extremely hard jobs, and I am afraid that we in 

Congress have not made them any easier by allowing sequestration 

to take effect. 

The single biggest takeaway from Strategic Choices Management 

Review is that Congress, by allowing sequestration to continue, is 

abdicating its constitutional responsibility to responsibly fund the 

military and to provide for the common defense. Through sequestration, Congress is forcing the Department of Defense to make 

some extremely difficult decisions that will undermine military 

readiness and put more unneeded stress on our troops, civilian employees, and military retirees. 

I hope our witnesses today can help us understand the pain that 

sequestration will cause next year and into the future. I would ask 

them to walk us through those choices that will have to be made 

and those risks that will be imposed. And we should be clear— 

when we talk about risk in the context of the Department of Defense, we mean that military conflicts will go on longer or our response will be slower and smaller and those translate to greater 

loss of life. 

Without a doubt, the Department of Defense must become more 

efficient, and Congress will have to help them do that. But sequestration will continue to force the Department to make unacceptable 

cuts to force structure, modernization, and benefits for our military 

personnel and retirees, creating significant readiness shortfalls. 

The SCMR drives home the point that continued budget policies of 

fiscal austerity and intentionally starving the Federal Government 

of revenue put our national security at risk. 

We are already on a path to significant deficit reductions. I am 

in favor of simply lifting sequestration and ceasing to impose these 

dramatic costs on our military. Those who refuse to end sequestration have the responsibility of proposing a balanced package of revenue increases and spending cuts that do not harm our national security. Those who refuse are allowing sequestration, and the significant harm it causes, to persist. In particular, those who continue to insist on tax cuts above all else have a responsibility to 

answer the question: How much military risk are you willing to 

take to preserve your tax cut? 

Thank you Mr. Chairman, and again, I very much appreciate the 

witnesses appearing here today. 
51 

1 

DEPUTY SECRETARY OF DEFENSE ASHTON B. CARTER AND

VICE CHAIRMAN OF THE JOINT CHIEFS OF STAFF JAMES A. WINNEFELD JR. 

PREPARED TESTIMONY

HOUSE ARMED SERVICES COMMITTEE

AUGUST 1, 2013

Mr. Chairman, Congressman Smith, Members of the Committee, we appreciate the 

opportunity to appear before you to discuss the findings of the Strategic Choices and 

Management Review (SCMR). Let us begin by first thanking the members of the Committee for 

your continued support of our men and women in uniform, as well as our civilian workforce,

especially while our nation is still at war.

The Department remains fully committed to the enactment of the President’s FY 2014

defense budget proposal because it supports the goal of deficit reduction while providing the 

adequate level of resources to maintain a strong national defense in a rapidly shifting and highly 

complex global security environment. 

However, since March 1, sequestration has been the law of the land. Exactly one year ago 

today, Deputy Secretary of Defense Carter testified before this Committee that “sequestration 

would have devastating effects on the Department and its personnel both because of the size of 

the sequester cuts and because of the mindless way the law requires that they be allocated... It 

introduces senseless chaos into the management of more than 2,500 defense investment 

programs, waste into defense spending at the very time we need to be careful with the taxpayer’s 

dollar, inefficiency into the defense industry that supports us, and causes lasting disruptions even 

if it only extends for one year.”1

As predicted, sequestration’s impacts on the Department’s operations have thus far been 

damaging and far-reaching. And in the absence of an overall longer-term budget agreement 

between the President and Congress, we have concluded that we must plan for the possibility that 

sequestration-level budgetary cuts imposed by the Budget Control Act (BCA) will remain in 

effect. 

Accordingly, Secretary Hagel directed the Deputy Secretary of Defense, working with 

the Chairman of the Joint Chiefs of Staff and the Department’s civilian and military leadership,

this past March to conduct a Strategic Choices and Management Review in order to prepare the 

Department for a range of budget scenarios.

 

1 See Attachment 1: Deputy Secretary of Defense Ashton B. Carter, Prepared Testimony, House Armed Services 

Committee, August 1, 2012.
52 

2 

As its title suggests, the SCMR had two parts, one focused on strategic choices and one 

focused on managerial ones. This is an important moment strategically, as the United States

makes the enormous transition from the post-9/11 decade defined by Iraq and Afghanistan to 

challenges and opportunities, like the Asia-Pacific rebalance and cyber, which will define our 

future. Changes in our strategy and changes in our budget are in alignment. Managerial matters 

like IT consolidation and compensation reforms are not strategic, but if we do not make these 

changes or Congress does not permit them, then we have less money for strategic change. A 

unified Review was therefore necessary. 

The scenarios considered in the SCMR reflect today’s budget debates: They range from 

the President’s FY 2014 defense budget proposal, which includes an additional $150 billion 

reduction in defense spending over FY 2014-23 (mostly cuts occurring later in that period), to 

the BCA “sequestration” caps, which would cut another $52 billion from defense in FY 2014, 

with similar cuts each year thereafter. Fundamentally, the SCMR was about preparing options 

for the Secretary in anticipation of an environment of uncertainty.

The formal SCMR process is now complete, and its findings are sobering. We hope we 

will never have to make the most difficult choices that would be required if the sequestrationlevel budgetary caps persist. But the SCMR has formulated and framed these kinds of choices for 

us, and now we are ready if confronted with this scenario.

STRATEGIC TRANSITION

Before addressing the SCMR findings in greater detail, it is important to understand the 

strategic environment in which we are operating.

As President Obama made clear in the new Defense Strategic Guidance the Department 

released in January 2012, we are turning a strategic corner, from a post-9/11 era dominated by 

the two wars in Iraq and Afghanistan to the challenges and opportunities that will define our 

future security. Those challenges include: continued turmoil in the Middle East, the persistent 

and evolving threat of terrorism, proliferation of weapons of mass destruction, a range of new 

threats such as cyber, and rising powers whose future course is uncertain.

We also see great opportunities, among them: shifting the center of gravity of both our 

intellectual and physical efforts toward the Asia-Pacific region in order to continue our sevendecade old stabilizing role; developing innovative capabilities from a vibrant defense technology 

effort; capitalizing on the lessons of the last decade regarding the innovative use of force,

including special forces and the integration of intelligence and operations; managing presence in 

new ways; leveraging the Reserve and Guard components that have performed so superbly over 
53 

3 

the past decade; and building the capacity of partners and allies so they may shoulder more of the 

burden of ensuring a peaceful world.

This great strategic transition coincides with the need to absorb some reductions in 

defense spending in the interest of the nation’s overall fiscal security.

In terms of our responsibility to the American taxpayer, we know that in making this 

strategic transition, we only deserve the amount of money we need and not the amount of money 

we have gotten used to.

As a down-payment on these reductions, we successfully trimmed the Department’s 

budget by $487 billion over 10 years. This half-trillion-dollar adjustment came on top of 

significant adjustments that Secretary Gates made to eliminate unneeded or underperforming 

acquisition programs and the numerous efficiency initiatives he implemented. At the same time, 

our Overseas Contingency Operations (OCO) funding – which is not included in the base budget 

and which is largely for Iraq and Afghanistan – is also decreasing, now that we have exited Iraq 

and are drawing down our forces in Afghanistan. These reductions, taken together, compare in 

pace and magnitude to historical cycles in defense spending the nation has experienced in the 

past when major conflicts have ended, such as after Vietnam, and after the Cold War.

FY 2013 IMPACT OF SEQUESTRATION

On top of all these reductions, we are now confronted with the harmful effects of 

sequestration. The blunt, arbitrary, across-the-board spending cuts we experienced in Fiscal Year 

2013 have been extremely disruptive to every Defense Department program and have had a 

devastating impact on readiness.

Sequestration reduced our total FY 2013 budget by $37 billion, including cuts of $20 

billion in our day-to-day operating accounts. We realized last January, before sequestration

kicked in, that we had potentially large budget problems, and we began taking action. We 

imposed hiring freezes, cuts in travel and conferences, reductions in facilities maintenance, and 

much more.2 But these savings were not nearly enough. The need to provide full wartime 

funding to our troops, and some unexpected growth in OCO costs, led to a total operating 

shortfall of more than $30 billion with just six months left in the fiscal year. 

Once sequestration was triggered, we did everything we could under this deliberatively 

restrictive law to mitigate its harmful effects on national security. For example, the President 

 

2 See Attachment 2: Memorandum from Deputy Secretary of Defense Ashton B. Carter, “Handling Budgetary 

Uncertainty in Fiscal Year 2013,” January 10, 2013.
54 

4 

used his authority under the law to exempt military compensation from sequestration. We also, 

of necessity, fully protected funding for Afghanistan and other ongoing operations as well as

wounded warrior programs. We are fully protecting our core nuclear deterrent, critical elements

of homeland defense, some Special Operations Forces, and other critical capabilities. And we are

fully protecting other key expenditures such as those, for example, that allowed school children 

in our military schools to finish the school year in a way that can be fully accredited.

There are accounts we are preferentially protecting to the extent feasible: First, key 

features of the new defense strategy that we have described. Second, forces forward-deployed to 

the Asia-Pacific and the Persian Gulf for possible near-term contingencies, though we have had 

to trim several deployments to these regions. Third, military family programs. And fourth, 

certain acquisition efficiencies like multi-year contracts.

But we cannot exempt or protect most of our budget, and so we have been seeing the 

serious repercussions of sequestration as the months go by. Needing immediately accessible 

savings, we have been forced to make numerous changes to close this huge gap, ranging from 

civilian hiring freezes to cuts in facilities maintenance to layoffs of temporary workers. We have 

also been forced to make major cuts in training and maintenance, seriously damaging military 

readiness, and we were forced to impose furloughs on our valued civilian employees. 

For those who continue to believe that the impact of sequestration, the need to fully fund 

wartime costs, and growth in OCO costs is overstated, let us share some examples of how it is 

already having an effect:

x Fewer than half of the Air Force’s front line fighter squadrons are combat-ready. The Air 

Force has until recently grounded 12 combat-coded squadrons – over 10 percent of its 

active duty squadrons – and many support squadrons. If a crisis erupted, these squadrons 

would either have to respond at a lower readiness level or take additional time to prepare. 

The Air Force has recently resumed flying operations at some of these squadrons, but it 

will take months to restore pilot proficiency fully. 

x The Army has cancelled all Combat Training Center rotations for those brigade combat 

teams not slated to deploy to Afghanistan or to be part of the global response force. That 

is seven units that will only be partially trained to confront any crisis. This means that if 

we are called upon to defend South Korea, or to secure chemical weapons in Syria, the 

young men and women the Commander in Chief will need to send in harm's way will 

never have had to opportunity to work together as a part of large Army formation. 

x The Navy has cancelled multiple ship deployments, including for the USS Truman 

Carrier Strike Group, which was supposed to deploy to the Middle East earlier this year.
55 

5 

Due to cuts in training and maintenance, we are having to reduce deterrent presence in 

order to retain the ability to surge the ships needed for a crisis.

x We are now in the fourth week of furloughs for approximately 650,000 DoD civilian 

employees. These furloughs are harming our maintenance and medical capability, 

slowing contracting, and having negative effects at most support activities in the 

Department. The furloughs are also seriously damaging workforce morale. By reducing 

their pay by 20 percent during every furlough week, we have forced many of our 

dedicated civilian team members into difficult financial situations – all on top of over two 

years of frozen pay and minimal performance-based bonuses.

These are just a few significant examples of the many cutbacks that have been caused by 

sequestration and growth in OCO costs.

THE SCMR PROCESS

It is against this background that Secretary Hagel asked Deputy Secretary Carter and

Chairman Dempsey, to conduct the SCMR.3 The Secretary directed that all past assumptions and 

systems be examined in order to help define the major choices and institutional challenges 

affecting the Department in the decade ahead.

The SCMR was never intended to define the exact composition of the future force as we 

undergo the titanic transition we must make from the military of the post-9/11, Iraq, and 

Afghanistan era to the new strategic era. That is simply not possible because of the uncertainty 

we face as a result of Washington’s budget gridlock. 

Rather, the SCMR defined the decision-space faced by the Department’s senior 

leadership, and, in turn, will guide the services and defense agencies in developing their Fiscal 

Year 2015-2019 budgets later this year, as well as ultimately inform the Department’s next 

Quadrennial Defense Review early next year. The services and defense agencies are now in the 

midst of determining exactly the shape, size, and readiness of a military operating with severely 

reduced long-term funding – and what it would be capable of doing. So it is important not to 

think of the SCMR as rendering a final verdict on how the Department will look in the event 

sequestration-level cuts persist, but it did formulate the hard choices the leadership will face.

With respect to process and methodology, the SCMR’s analytical approach was

inclusive, collaborative, and thorough. The group included the service secretaries, the Joint 

 

3 See Attachment 3: Memorandum from Secretary of Defense Chuck Hagel, “Strategic Choices and Management 

Review,” March 15, 2013.
56 

6 

Chiefs of Staff, the combatant commanders, and the undersecretaries of defense, because our 

preparation for future contingencies has to be shaped by those who are going to execute it. They 

gathered their staffs into 11 working groups and dozens of subgroups to scrutinize every nickel 

of defense spending – from bombers to cyber, pay and healthcare, to the size of the Office of the 

Secretary of Defense, and other defense agencies. We looked at every aspect of the defense 

establishment – business and acquisition practices, contingency planning, force structure, 

compensation, and modernization investments. We also reexamined how the military operates, 

evaluates risk, measures readiness, and determines requirements.

The Department’s senior leadership convened 18 times over a period of three months to 

review emerging insights and refine options surfaced by the SCMR working groups.

To complement this top-down analysis, as part of the SCMR process we also initiated a

bottom-up review conducted by each of the services. The services were asked to propose their 

own solutions for how to bring down costs and reach the various budget targets—particularly in 

regards to restructuring their forces. These views were synthesized with the results of the 

working groups and then discussed by the Department’s entire senior leadership team. The 

Secretary was briefed throughout this effort and on July 9 he briefed the President on the 

SCMR’s findings.

Two overarching priorities guided the SCMR’s deliberations:

First, we said we would preserve—to the greatest degree possible—the key tenets of the 

President’s 2012 Defense Strategic Guidance. The reasoning for this was simple: priorities like 

rebalancing to the Asia-Pacific and cyber security are essential to the strategic transition we must 

make to ensure the United States is prepared to confront the challenges and capitalize on the 

opportunities of the 21st century.

Second, we would look first to savings gained from reducing overhead and structural 

costs (“tail”) in order to minimize the impact on the capability and readiness of the force

(“tooth”).

As noted earlier, in undertaking the SCMR, we scrutinized Department spending under 

three budget scenarios4

:

x The President’s FY 2014 budget, which we believe is the right level to meet today’s 

complex national security threats and achieve savings totaling $150 billion over 10 

years on top of the $487 billion in cuts mandated by the BCA and begun by us in 

 

4 See Attachment 4: Memorandum from Deputy Secretary of Defense Ashton B. Carter, “Strategic Choices and 

Management Review – End State,” May 29, 2013.
57 

7 

FY 2013. This budget, which includes many difficult cuts, is a responsible way to 

trim the defense budget because the cuts are carefully calibrated and would ramp up 

over those 10 years, giving us time to plan and adjust.

x The BCA sequestration-level caps – which would cut DoD funding by $52 billion 

next year compared to the President’s budget; if the caps remain in place, the cuts 

would commence immediately rather than building over time, and would total 

roughly $500 billion over 10 years. 

x An “in-between” level, which would reduce defense spending by about $250 billion 

over FY 2014-23, largely in the latter years of this period. 

SCMR FINDINGS

With these guidelines and scenarios as our starting point, the SCMR revealed three key 

findings:

1) In all of the budget scenarios we considered, savings from reducing DoD’s overhead, 

administrative costs, and operating expenses (which we refer to as “efficiencies”), as well 

as serious reforms to compensation for civilian and military employees, are both crucial.

Compensation alone makes up more than half of the defense budget. If overhead and 

compensation continue to grow as the budget shrinks, then all of the impact of cuts will 

fall on the other parts of the defense budget – force structure, training for readiness, and 

investment in new technologies – resulting in reduced combat power and increased 

national security risk. These reforms are difficult and painful, but we have to do them, 

and to do them we need the need the partnership of Congress and the lifting of many 

legislative restrictions under which we now operate. 

Yet we also found that even the most aggressive and ambitious packages of efficiencies 

and compensation reform mapped out in the SCMR are not by themselves enough to 

meet the budget reductions called for in any of the scenarios we analyzed. The SCMR 

showed that cuts in combat power – force structure, readiness, and investment – will be 

necessary in all three budget scenarios. 

2) The SCMR found that over time, a combination of carefully chosen efficiencies and 

compensation reforms, combined with various carefully and strategically chosen 

alternative approaches to cuts in force structure, investment, and readiness, could achieve 

sequestration-level cuts over time. But there is no strategically and managerially sound 

approach to budget cuts that can close that gap within the next few years. We simply
58 

8 

cannot downsize the force prudently in a few years – it takes time to downsize forces, to 

cut employees, to close bases, and to reap savings from reforms. Strategic adjustments 

take time. If sequestration-level cuts must be implemented in the meantime, drastic 

measures that are not strategically or managerially sound are the result. You see this 

already in FY 2013, where we had sequestration applied immediately, resulting in such 

actions as readiness stand-downs and furloughs. 

These serious adverse effects occur even if Congress provides flexibility in administering 

budget cuts and sequestration. Flexibility in this instance would mean that Congress 

approves program cuts denied in the past and allows reallocation of funding, without 

regard to existing budget structures or limitations on transfer authority. However, the cuts 

are too steep and abrupt to be mitigated by flexibility, no matter how broadly defined. 

Flexibility in time is critical.

3) The SCMR showed that the President’s FY 2014 budget proposal allows the Department 

to still implement the main tenets of the President’s Defense Strategic Guidance. Force 

reductions in this scenario are necessary, but if accompanied by efficiency and 

compensation reforms, can be made in a way that incurs only minimal risk to our 

strategy, cutting parts of the force that are, in a sense, excess to our strategic needs—such 

as reducing the size of our ground and tactical air forces as we draw down from more 

than a decade of stability operations in Iraq and Afghanistan.

EFFICIENCY SAVINGS

The SCMR sought to streamline the Department’s overhead by shedding less productive 

activities and consolidating resources, maximizing what we call “efficiencies” that help us save 

money by reducing staff and costs.

The SCMR looked to build on the efficiencies initiated by Secretary Gates, who found 

$150 billion in savings over a five-year period, and Secretary Panetta, who found $60 billion of 

cuts that are reflected in the President’s budget request, as well as the $34 billion that Secretary 

Hagel submitted in our latest budget. These efficiencies included the overhaul of our acquisition 

practices that Secretary Gates and Deputy Secretary Carter began in 2009 when he was the 

Undersecretary of Defense for Acquisition, Technology, and Logistics and that have begun to 

show much-needed improvements in the buying power of the defense dollar. The Department is 

continuing to implement these efficiency campaigns, and we have mechanisms in place for 

tracking progress. Despite good efforts and intentions, not every proposal has generated the 

savings we expected, or gained the support of Congress – most notably, BRAC. 
59 

9 

The SCMR faced the difficult but necessary task of finding additional efficiencies that 

would help trim the budget while preserving – and in some cases improving – operational 

effectiveness. We looked at the whole spectrum of how we do business, and came up with 

proposals for information technology consolidations, resource sharing and optimization of

service medical infrastructure, potential combatant command streamlining, and targeted 

reductions at defense agencies.

Some of these efficiencies are “best practices” that should be implemented regardless of 

our budget scenario. One of the SCMR findings in this category that we are already initiating is 

the phased 20-percent budget reduction for OSD, Joint Staff, and Service headquarters 

announced last month by Secretary Hagel. Although the 20 percent cut applies to budget dollars, 

organizations will strive for a goal of 20 percent reductions in government civilians and military 

personnel billets on headquarters staffs.

We will also be reducing the number of direct reports to the Secretary of Defense by 

further consolidating functions within OSD, as well as eliminating some positions. Additionally, 

we will be reducing intelligence analysis and production at combatant command intelligence and 

operations centers in order to foster closer integration and reduce duplication across the defense 

enterprise. We calculated that these efficiencies could save more than $10 billion over FY 2015-

19 and almost $40 billion over FY 2014-23 – over and above the savings from initiatives already 

underway.

Past efficiency campaigns have shown that implementation can be very challenging, so 

effective follow-through is critical if savings targets are to be realized. This is especially true of 

OSD reductions. Therefore, Secretary Hagel asked Deputy Secretary Carter to identify an 

individual from outside the Department, who is deeply knowledgeable about the defense 

enterprise and eminently qualified, to direct implementation of the OSD reductions and report 

directly to the Deputy Secretary.

We also identified a number of efficiencies that would cut a bit deeper and have 

significant and noticeable impacts that need to be weighed against other priorities. Adding the 

most aggressive of these proposals to the efficiencies mentioned above could save us as much as 

$30 billion over FY 2015-19 and up to $60 billion over FY 2014-23. We are formulating specific 

plans now and we will present approved proposals as part of the President’s FY 2015 budget.

It is important to emphasize that these savings from efficiencies, though substantial, will 

only get us a small fraction of the way to sequestration-level cuts of $450 billion over the next 

nine years. One of the numerous myths debunked by the SCMR process is that simply trimming 

the Department’s civilian bureaucracy will somehow solve our fiscal problems. The numbers 

simply do not support this fallacy. So while we are committed to implementing efficiencies
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wherever they can be found, implementing even the most aggressive ones will constitute only a 

portion of the cuts required by the BCA sequestration caps.

COMPENSATION SAVINGS

The SCMR also focused on personnel costs. The pay and benefits we provide for our 

military and civilian employees account for nearly half of the Department’s budget. While, to be 

very clear, the SCMR did not consider actual reductions in pay, it did look at options to slow the 

rate of growth of pay and benefits. Overall personnel costs have risen dramatically – some 40 

percent above inflation since 2001. Studies have shown that if personnel costs continued growing 

at that rate and the overall defense budget remained flat with inflation, these costs would

eventually consume the entire defense budget.

Any discussion of military compensation must acknowledge that no one in uniform is 

“overpaid” for what they do for this country. The significant military pay and benefit increases 

over the last decade reflected the gratitude of a nation and the need to sustain a force under 

considerable stress – especially the Army and Marines – during the height of the Iraq and 

Afghanistan campaigns. People are DoD’s most important asset – and we must sustain 

compensation packages that recruit and retain the finest military in the world. But the post-9/11 

wars are drawing down and in recent years the military services have all comfortably exceeded 

their recruiting and retention goals. 

Likewise, our civilian personnel – 48 percent of whom are veterans themselves – are 

critical to enabling our war fighting mission, as well as supporting our military families, retirees,

and veterans. Civilians fix our tanks, ships, and planes. They staff our hospitals and teach 

military children. They perform engineering, contracting, financial management, and many other 

key tasks which allow the Department to develop, acquire, and field our weapons systems and 

war fighting platforms. They play a vital role in almost everything that we do. And they have 

already experienced substantial real pay cuts because of pay freezes and furloughs.

But serious reforms to compensation are essential to avoid deeper reductions in combat 

forces. The SCMR developed a range of possible reforms. Examples include changing military 

health care for retirees to increase the use of private-sector insurance when available; changing 

how the basic allowance for housing is calculated so that individuals are asked to pay a little 

more of their housing costs; reducing the overseas cost of living adjustment; and continuing to 

limit military and civilian pay raises.

Beyond these proposals, we explored deeper reforms in compensation, such as 

eliminating civilian pensions for retired military personnel serving in civilian government 
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service, ending subsidies for defense commissaries, and restricting the availability of 

unemployment benefits. This package would yield savings of almost $100 billion over the next 

decade, but would have a significant impact on our service members and our workforce. But a 

sequestration-level scenario would compel us to consider these changes because there would be 

no realistic alternative that did not pose unacceptable risk to national security. 

The Department and the Administration have not made any decisions about specific 

compensation proposals. Instead, the Secretary has asked the Chairman to develop a set of 

proposals to achieve savings in military compensation that meets savings targets identified in the 

review – almost $50 billion over the next decade. He has his OSD staff doing the same for 

civilian compensation. Both efforts are building on the compensation options considered by the 

SCMR, looking for the right scale and mix of compensation savings packages that present the 

least negative impact to the military and civilian force.

In addition, the Military Compensation and Retirement Modernization Commission, 

established by the FY 2013 National Defense Authorization Act, has appointed nine members 

and will be meeting regularly over the next few months to examine military compensation issues.

It is important to emphasize that these savings are on top of, and assume that Congress 

enacts, the President’s FY 2014 budget proposals, including compensation reforms such as a one

percent military pay raise and TRICARE co-pays.

Many of the additional measures identified by the SCMR have previously been opposed 

by some members of Congress. We cannot achieve the savings associated with the 

implementation of these reforms without congressional support. In the absence of these needed 

authorizations, we will have to find savings elsewhere, which will degrade force readiness, 

capacity, and capability. The simple fact is that if we maintain the current trajectory of 

compensation and other benefits, we will have to send many more of our precious people home 

because we will not be able to pay them all.

The Department is working to identify the congressional requirements and restrictions 

that make it harder for us to operate more efficiently – ones that must be re-examined in light of 

our fiscal situation. We need Congress to partner with us in tackling the growing threat to the 

financial viability of the Department. If we don’t act together, the cost of manning the U.S. 

military and the civilians who support it will continue to grow at a rate that squeezes out budgets 

for training and modernization, resulting in a “hollowing out” of the force.
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STRATEGIC CHOICES FOR FORCES AND MODERNIZATION

The SCMR showed that even the most aggressive efficiencies and compensation 

adjustments do not create enough savings to meet topline reductions for any of the budget 

scenarios – and don’t come close to meeting sequestration-level cuts. Consequently, we will 

have to reduce our force structure well beyond those reductions already planned as a result of the 

$487 billion budget cuts built into the FY 2014 budget.

The SCMR explored different options for how to accomplish this. At the President’s FY 

2014 budget level, force reductions can be modest and incur only minimal strategic risk. There 

are parts of the current force that are excess to our strategic needs, and it is these parts where we 

would make reductions.

For example, in drawing down from more than a decade of war in Iraq and Afghanistan, 

we can reduce the size of our ground and tactical air forces—even beyond the current draw down 

articulated in the FY 2014 President’s Budget. Our approach was not to take reductions 

proportionally across the military services. While we want to preserve flexibility for each 

military service to develop the best force possible given reduced resources, the Review found 

that we could still fulfill required missions while reducing Army end strength to between 

420,000 and 450,000 in the active component from today’s plan for 490,000, and between 

490,000 and 530,000 in the Army reserves, from 555,000 today. Similarly, the Air Force can 

reduce tactical aircraft squadrons – potentially as many as five – and the size of the C-130 fleet 

with minimal risk. In doing so, our goal is to ensure that, by the end of the Future Years Defense

Program (FYDP), we have the minimum force needed to meet operational requirements and 

surge for contingencies.

The SCMR showed clearly that the deep cuts mandated by the BCA’s sequestration caps 

will not allow the Department to achieve all the features of the President’s strategic guidance

even if those cuts were imposed slowly over the ten-year period covered by the BCA. 

But, as we stressed earlier, the abrupt timeline of the law as currently enacted provides no

avenue to make strategic cuts, since under the BCA the defense budget must be reduced 

immediately, not phased in gradually. Most cost-cutting measures take time to yield savings.

An example is savings from cutting our naval fleet – it takes time to recoup savings from 

bringing down the number of ships, especially for nuclear-powered vessels where our shipyards

have limited capacity to safely and securely decommission ships. Similarly, as we reduce the 

force, it makes good management sense to close bases, but that takes up-front money to begin the 

process, time to do it properly and effectively, and a few years to begin recouping savings. Even 

involuntary separations of military personnel, in an effort to reduce force structure quickly, save 

little in the year they occur because, for most, there would be added costs associated with 

separation, travel, unused leave, and unemployment insurance.
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This is where the SCMR’s findings are particularly alarming. Under sequestration, even 

the most ambitious efficiencies and most draconian cuts to compensation and force structure

would yield less than a third of what we would need to comply with the BCA sequestration caps

in the next several years – and thus would not shield the Department from making further deep 

cuts to readiness and training accounts of the kinds we are experiencing this year, as well as 

requiring disproportionately large cuts to investment accounts – acquisition and R&D contracts –

that risk reducing our long-term technological superiority.

As a result, in order to comply with the law in the near-term, the Department would have 

no choice but to draw down from accounts that are able to produce the largest savings the fastest 

– readiness and modernization. This would mean disrupting many carefully-conceived 

acquisition programs and eating deeply into our seed corn – the very investments that give our 

military a competitive advantage over others. Services would have to defer equipment 

maintenance, cancel training, halt construction, slow procurement, and stand down on 

developing and testing new technologies.

To meet these severe caps in the long-term, the SCMR examined two illustrative strategic 

options that bracket our choices in each force element – one that seeks to preserve a modernized

force by sacrificing capacity, and one that preserves larger force capacity at the expense of 

modernization programs.

The former approach would compel us to make difficult choices about how we provide 

military forces to deter adversaries, assure allies, and respond to emerging crises. We would 

further shrink the Army, reduce the number of carrier strike groups and big-deck amphibious 

ships, and retire older Air Force bombers. We would protect investments to counter anti-access 

and area-denial threats, such as the long range strike family of systems, submarine cruise-missile 

upgrades, and the Joint Strike Fighter. And we would continue to make cyber capabilities and 

special operations forces a high priority. This strategic choice would result in a force that would 

be technologically dominant, but would be much smaller and therefore able to go fewer places 

and do fewer things, especially if crises occurred at the same time in different regions of the 

world.

The second approach would trade away high-end capability for size. We would look to 

sustain our capacity for regional power projection and presence by making more limited cuts to 

ground forces, ships and aircraft. But we would cancel or curtail many modernization programs, 

slow the growth of cyber enhancements, and reduce special operations forces. This would result 

in a modernization holiday, and a military with dramatically reduced modernization funding may 

find its ageing equipment and weapons systems less effective against more technologically 

advanced adversaries. 
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Whichever way we leaned, we would be forced to adopt a more modest defense strategy. 

Neither illustrative option we examined in the SCMR is compatible with current strategy as 

defined in the President’s Defense Strategic Guidance.

Under sequestration, a large number of critical modernization programs would be at risk.

With respect to force structure, we could see much larger reductions in ground forces: We could 

see our active Army force shrink from 490,000 soldiers to between 380,000 and 450,000. The 

US Marine Corps would have to shrink from its current size of 182,000 to between 150,000 and 

175,000. Additional choices could also entail significant cuts to the naval fleet, including capital 

ships, and cuts to Air Force fighter and bomber squadrons. We could see carrier strike groups fall 

from the current number of 11 to 8 or 9. These reductions would also result in even more

veterans – many who have recently served in combat – entering the domestic labor market in a 

weakened economic environment.

To reiterate, the SCMR did not make final choices among these possibilities, but it did 

map out various options to reach each budget scenario. The President and Secretary of Defense 

would obviously make decisions on particular investment or force changes depending on the 

budget scenario.

What the SCMR does show clearly is that the President’s FY 2014 Budget allows us to

preserve the Defense Strategic Guidance, the “in-between” budget scenario we evaluated would 

“bend” the strategy in important ways, and sequestration-level cuts would “break” some parts of 

the strategy no matter how the cuts were made. 

FY 2014 IMPACTS

The SCMR focused on options for the 10-year budget period covered by the BCA, and 

more immediately for the FYDP covering FY 2015 through FY 2019, but we must also plan for 

possible sudden cuts in FY 2014 below the President’s budget. In FY 2014, the Department 

would not be able to meet sequestration-level budget reductions by making only the strategic 

cuts identified in the SCMR; on the contrary, even if we embarked on these profound strategic 

changes in FY 2014, we would still be $30-35 billion per year short of the topline target in FY

2014 and FY 2015 – nearly the whole size of the sequestration cut we took in FY 2013.

If Congress does not permit us to make rapid cuts in areas like compensation, we would 

be short even more. We would have no choice but to continue some of the damaging, nonstrategic cuts we incurred in FY 2013, compounding an already-serious readiness deficit.5

 

5 See Attachment 5: Letter from Secretary of Defense Chuck Hagel to Sens. Levin and Inhofe, “Contingency Plan 

for $52 Billion Cut in FY 2014 Defense Budget," July 10, 2013.
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We are looking for ways to make these immediate cuts in the least damaging way, but 

there are few ways to limit their impact. Given the reality that up to half of our budget is 

essentially placed off limits for savings and that we cannot turn to much of our budget for 

immediate savings – for example, we cannot generate quick savings from cutting personnel and 

infrastructure – the only way to implement an abrupt 10 percent reduction in the defense budget 

is to impose disproportionate reductions in training, maintenance, and investment. Readiness 

would not improve much from its current degraded level and in some cases would continue to 

decline. We would also be forced to make disproportionately large cuts in funding for 

modernization programs, eroding our technological superiority and damaging our Better Buying 

Power initiatives.

The SCMR analysis showed in the starkest terms how a 10 percent defense spending 

reduction in reality causes a much higher reduction in military readiness and capability –

particularly as we protect necessary spending like funding for Afghanistan, our core nuclear 

deterrent, and other programs we mentioned earlier. Unlike the private sector, the federal 

government – and the Defense Department in particular – simply does not have the option of 

quickly shutting down excess facilities, eliminating entire organizations and operations, and 

shedding massive numbers of employees – at least not in a responsible, moral and legal way.

The bold management reforms, compensation changes and force structure reductions 

identified by the SCMR can help reduce this damage, but they will not come close to avoiding it 

altogether. 

CONCLUSION

The abrupt, deep cuts caused by the BCA caps in FY 2014 will force DoD to continue to 

make the kind of harmful, yet unavoidable, decisions we have had to make during the present 

fiscal year. If these caps continue in future years, the Department will have to make sharp cuts 

with far-reaching consequences that will limit combat power, reduce readiness, and irrevocably 

alter the way the military supports the national security interests of the United States. The SCMR 

produced options that would prepare the way for these large cuts, but plans alone cannot avoid 

serious damage to our military capabilities. 

The Review demonstrated that strategic cuts are only possible if they are “back-loaded.” 

While no agency welcomes additional budget cuts, a scenario where we have additional time to 

implement reductions – such as in the President’s budget – would be far preferable to the deep 

cuts of sequestration.
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Tragically, the prospect of serious damage to national security detailed in this testimony

is not a result of an economic emergency or recession that makes a sudden reduction in 

expenditures necessary. It is not because defense cuts are a mathematical answer to the nation’s 

overall fiscal challenge, or because paths of revenue growth and entitlement spending have been 

explored and exhausted. It is not because the world has suddenly become more peaceful. It is not 

due to a breakthrough in military technology or a new strategic insight of some sort that makes 

continued defense spending unnecessary. It is purely the collateral damage of political gridlock. 

And friends and potential enemies around the world are watching our behavior. 

To be sure, America will remain the world’s strongest military power. But we are 

accepting unnecessary risk. As Secretary Hagel said yesterday, it is unworthy of the service and 

sacrifice of our nation’s men and women in uniform and their families. And even as we confront 

tough fiscal realities, our decisions must always be worthy of the sacrifices we ask America’s 

sons and daughters to make for the country.

We in the Department of Defense are prepared to make difficult strategic and budgetary 

choices. We are also committed to finding new ways to improve the way we do business and 

obtain greater efficiency and productivity in defense spending. But in order to sustain our 

military’s unrivaled strength, we need the cloud of uncertainty dispelled, and not just moved to 

the horizon, kicking the budget can down the road year by year. Along with budgetary stability, 

we need time to make changes strategically. And we need the support of Congress to make 

budget cuts in a managerially sensible way. We need a return to normal budgeting and a deal that 

the President can sign. Then, together with Congress, we can continue the strategic transition 

upon which we have embarked, with certainty and stability.
67 

DEPUTY SECRETARY OF DEFENSE ASHTON B. CARTER AND

VICE CHAIRMAN OF THE JOINT CHIEFS OF STAFF JAMES A. WINNEFELD JR. 

PREPARED TESTIMONY

HOUSE ARMED SERVICES COMMITTEE

AUGUST 1, 2013

ATTACHMENTS

Attachment 1: Deputy Secretary of Defense Ashton B. Carter, Prepared Testimony, House 

Armed Services Committee, August 1, 2012.

Attachment 2: Memorandum from Deputy Secretary of Defense Ashton B. Carter, “Handling 

Budgetary Uncertainty in Fiscal Year 2013,” January 10, 2013.

Attachment 3: Memorandum from Secretary of Defense Chuck Hagel, “Strategic Choices and 

Management Review,” March 15, 2013.

Attachment 4: Memorandum from Deputy Secretary of Defense Ashton B. Carter, “Strategic 

Choices and Management Review – End State,” May 29, 2013.

Attachment 5: Letter from Secretary of Defense Chuck Hagel to Sens. Levin and Inhofe, 

“Contingency Plan for $52 Billion Cut in FY 2014 Defense Budget," July 10, 2013.
68 

DEPUTY SECRETARY OF DEFENSE ASHTON B. CARTER 

PREPARED TESTIMONY 

HOUSE ARMED SERVICES COMMITTEE 

WEDNESDAY AUGUST 1, 2012 

EMBARGOED UNTIL RELEASED BY THE 

COMMITTEE 

 
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DEPUTY SECRETARY OF DEFENSE ASHTON B. CARTER 

PREPARED TESTIMONY 

HOUSE ARMED SERVICES COMMITTEE 

WEDNESDAY AUGUST 1, 2012 

I appreciate the opportunity to join with the Acting Director of the Office of Management 

and Budget (OMB) in testifying today regarding the effects of sequestration. 

Secretary Panetta and I have been emphasizing for many months that sequester would 

have devastating effects. While I will focus on the impact on the Department of Defense (DoD), 

Acting Director Zients’ testimony makes clear that the effects on non-defense agencies would be 

equally devastating. We urge Congress to avoid sequestration by devising a comprehensive and 

balanced deficit reduction package that both the House and Senate can pass, and that the 

President can sign. Back in February, the President’s Budget for FY 2013 in fact contained a 

proposal for such a balanced reduction. Secretary Panetta and I strongly urge that the Congress 

enact a balanced deficit reduction plan to avoid sequestration. 

Acting Director Zients already described the mechanism by which sequester would work. 

In my statement today, I describe some impacts specific to DoD. But much of what I say would 

be echoed by managers in other federal agencies and by industry leaders who furnish critical 

goods and services to the federal government. And, while I can describe many of sequester’s 

impacts on DoD, I cannot describe a “plan” that somehow eliminates these consequences, or 

even mitigates them substantially. The reason for this is that sequester was designed to be an 

inflexible and mindless policy. It was never designed to be implemented. Instead, it was 

enacted as a prod to Congress to devise a comprehensive package to reduce the federal deficit. 

As I illustrate some of the impacts of sequester, it will be clear that it is a policy that 

should never be implemented. It introduces senseless chaos into the management of more than 

2,500 defense investment programs, waste into defense spending at the very time we need to be 

careful with the taxpayer’s dollar, inefficiency into the defense industry that supports us, and 

causes lasting disruptions even if it only extends for one year. Sequester in FY 2013 would 

seriously disrupt our forces and programs. Over the longer term, the lower caps in FY 2014 

through FY 2021 would require that we substantially modify and scale back the new defense 

strategy that the DoD leadership, working under the guidance of the President, so carefully 

developed just a few months ago. 

How Sequester Would Work in DoD

 If sequestration occurs, it would be governed by the Balanced Budget and Emergency 

Deficit Control Act (BBEDCA) of 1985, as amended by the Budget Control Act (BCA) of 2011. 

Congressional report language also specifies some of the detailed procedures for DoD. 
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2 

Sequestration requires that national defense programs be reduced by almost $55 billion in 

FY 2013, and the lowering of the discretionary caps would result in reductions of the same 

amount in each year from FY 2014 through FY 2021. The DoD budget would bear more than 95 

percent of this reduction. 

 While sequestration and lowering of the discretionary caps could have important effects 

for each of the next nine years, I will focus today mostly on the effects in FY 2013. In FY 2013 

special rules govern the sequester and require an across-the-board application of the cuts that is 

designed to be inflexible. To determine the size of the sequester by project and account, a 

percentage will be calculated based on the prescribed dollar cut (almost $55 billion) and the total 

of the FY 2013 appropriation and unobligated balances from prior years. Obviously, that 

percentage cut cannot be estimated precisely until we know the level of FY 2013 appropriated 

funds and the level of prior-year unobligated funds. 

Sequester would apply to all of the DoD budget, including the wartime or Overseas 

Contingency Operations (OCO) portions of the budget – with only one potential exception that is 

significant. Under the 1985 Act, the President has the authority to exempt all or parts of military 

personnel funding from sequestration. If the President chooses to utilize this authority for FY 

2013, he must notify the Congress by August 10, 2012, about the manner in which he will 

exercise the authority. If the President exempts military personnel funding from sequester in FY 

2013, then other DoD budget accounts must be cut by larger amounts to offset the military 

personnel exemption. DoD estimates that the percentage reductions under sequester could range 

from 8 percent for all DoD accounts (if military personnel funding is fully sequestered) to 10 

percent for accounts other than military personnel (if “milpers” funding is fully exempt from 

sequestration). These estimates assume that Congress provides funds for FY 2013 equal to the 

President’s request and reflects DoD’s best estimate of unobligated balances from prior years.

OMB will eventually calculate the sequester percentage and will use the percentage to 

calculate reductions in dollar terms for each budget account. How these reductions are applied in 

DoD varies between the operating and investment portions of the budget, as specified in law and 

applicable Congressional report language. Cuts to the operating portions of the DoD budget 

must be equal in percentage terms at the level of budget accounts. (Examples of budget accounts 

in the operating budget include Army active operation and maintenance, Navy reserve operation 

and maintenance, and Air Force Guard operation and maintenance.) Within each budget account 

in the operating portion of the budget, DoD can determine how best to allocate the reductions 

based on management judgments. For the investment portions of the budget, the dollar cuts must 

be allocated proportionally at a lower level of detail identified as “program, project, and activity 

(PPA)”. More than 2,500 programs or projects are separately identified and must be reduced by 

the same percentage. Absent a reprogramming action, the inflexible nature of the sequester law 
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means that DoD would have no authority to vary the amount of the reduction. Within a PPA, 

however, managers can decide how best to allocate the reductions. 

It is important to note that reprogramming – a method used by DoD to shift funding from 

lower to higher-priority projects during the year when funds are being executed – would at most 

offer a limited ability to modify the effects of sequester. Under current law, the amount of funds 

that can be transferred is limited. Moreover, any reprogramming that adds funds to a program or 

project must be offset by a cut to another program or project, which may be difficult because, as 

a matter of policy, we seek Congressional approval of reprogramming actions. Reprogramming 

might be used to offset some effects of sequester but, realistically, it would not offer a means for 

making wholesale revisions. 

To close this description of sequestration, let me say what sequestration would NOT do. 

Sequestration would generally not affect funds already obligated as of the date the sequester cuts 

are calculated. 

Impacts of Sequester

Acting Director Zients discussed some of the potential effects of the sequester on nondefense programs. Just as in non-defense agencies, sequestration would have devastating effects 

on DoD and its personnel both because of the size of the sequester cuts and because of the 

mindless way the law requires that they be allocated. Although we strongly believe that 

Congress should enact a balanced deficit reduction package and avoid sequestration, we have 

reviewed the law and identified some of the key impacts sequestration would have on the 

Department. 

As noted earlier, OCO funding – which pays for the added costs of wartime activities – is 

subject to sequester. Supporting our warfighters in combat is DoD’s highest priority. We would 

therefore endeavor to protect wartime operating budgets as much as possible, including the key 

operation and maintenance (O&M) accounts. The O&M accounts contain OCO as well as basebudget funding, and these two categories of O&M funding merge together during execution of 

DoD budgets. We could reduce the base-budget portions of O&M disproportionately and spare 

the OCO portions. We could take similar steps as needed in other accounts that include OCO 

funding. 

However, especially in the Army and the Marine Corps, this action would lead to large 

cuts in base-budget O&M. We would seek to minimize effects on training and readiness of units 

deploying, but we could probably not do so fully. As a result, some later-deploying units 

(including some deploying to Afghanistan) could receive less training, especially in the Army 

and Marine Corps. Under some circumstances, this reduced training could impact their ability to 

respond to a new contingency, should one occur. 
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Sequestration could also affect training in the other military services. We will seek to 

minimize effects on readiness. However, Air Force flying hours for pilots could be reduced by 

several hours a month and Navy steaming days could decline by several days a quarter. The 

result will be reduced training and lower readiness. 

The sequester would force us to reduce funding for civilian personnel, and I would join 

other senior federal managers in making difficult personnel decisions that will harm all of our 

departments. Although it is premature to describe in detail how sequester would impact the DoD 

civilian workforce, it might be necessary to impose a partial hiring freeze or unpaid furloughs. 

These actions would reduce our capability in important ways: fewer people to fix our weapons 

including those damaged in war, less expert time and attention available to enter into wellcrafted contracts and handle financial transactions, and less support for other critical day-to-day 

operations. 

Military families and retirees would be adversely affected by sequestration. For example, 

we could be forced to cut back on base support services, facility maintenance, and maintenance 

of government owned family housing. Commissary hours might have to be reduced. Funds for 

the Defense Health Program, which provides health care for retirees and military dependents, 

would be sequestered, resulting in delays in payments to service providers and, potentially, some 

denial of service. 

These various sequestration actions, taken together, would represent a major step toward 

creation of an unready, “hollow” military force. Military readiness would be added to the list of 

programs in other departments harmed by sequestration including nutrition assistance for lowincome women, education for young students, and research projects designed to improve 

American lives. 

Sequestration would also inevitably lead to universal disruption of DoD’s investment 

programs. Under current rules that govern the sequester process, every one of our more than 

2,500 procurement programs, research projects, and military construction projects would each be 

indiscriminately reduced. Those who manage these programs would be forced to join many 

other acquisition managers in non-defense agencies as they seek to accommodate the reduced 

funding for FY 2013, three months after the fiscal year starts. 

Some military managers would be forced to buy fewer weapons. For example, assuming 

proportional cuts and DoD’s current estimate of the size of the sequester, we would buy four 

fewer F-35 aircraft, one less P-8 aircraft, 12 fewer Stryker vehicles, and 300 fewer Army 

medium and heavy tactical vehicles compared with the requests in the President’s Budget for FY 

2013. Reductions in buy sizes will cause unit costs of weapons to rise, which will in turn 
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5 

demand further cuts in buy sizes. In cases where we cannot feasibly reduce the quantity of items 

bought – ships come immediately to mind – we would have to delay projects. There could be a 

delay of several months in the new CVN-78 carrier along with delays in the Littoral Combat 

Ship program and DDG-51 destroyer procurement. Some military construction projects could be 

rendered unexecutable by sequester. We could be forced to delay fixing schools, defer 

construction of new medical facilities, and delay environmental cleanup. 

I have focused on the effects of sequestration on DoD. But much of the Intelligence 

Community’s funding is within the DoD budget and is also subject to sequestration. As it would 

in DoD, sequestration would have devastating effects on the Intelligence Community. If 

sequestration occurs, senior managers in the Intelligence Community would join me and leaders 

in all affected non-defense agencies as we strive to meet the needs of American citizens while 

operating under a law that was purposely designed to be inflexible. 

While I have focused on effects in FY 2013, sequestration and lowering of the 

discretionary caps reduces DoD budgets by $50 to $55 billion in each year from FY 2013 

through FY 2021. The cuts beyond FY 2013 would not have to be implemented in the acrossthe-board manner that I have just described. But the cuts are still large. Even if the President 

elects to exempt military personnel funding in FY 2013, the outyear cuts would force the 

Department to make substantial reductions in military personnel and units in the years beyond 

FY 2013. Otherwise we will end up with too many units and not enough funds to train and equip 

them. Significant cuts in military units would, in turn, require that we revisit the national 

security strategy that the President put in place last January. While it is premature to outline 

specifics, sequestration would force DoD to revise a strategy that was carefully crafted and 

designed to meet current national security needs. 

Next Steps on Sequester 

While we can foresee the harmful impacts of sequester, as I have described, we cannot 

devise a “plan” that eliminates, or even substantially mitigates them. Sequester defies rational 

“planning.” It was designed to be irrational. We are working with OMB to understand this 

complex legislation, and we are assessing impacts. Because we are still five months from 

implementation, Congress has the time to enact a balanced deficit reduction plan and halt 

implementation of this inflexible law. In the unfortunate event that sequestration is actually 

triggered, we will work with OMB and – like all the federal agencies affected by this law – we 

will be ready to implement. 

 But we are equally worried about a different type of error. This would occur if 

sequestration does not happen but we end up triggering some of its bad effects anyway. For 

example, we do not want to unnecessarily alarm our employees by announcing adverse personnel 

actions or by suggesting that such actions are likely. We do not want to hold back on the 
74 

6 

obligation of funds – either for weapon projects or operating programs – that would have been 

obligated in the absence of a possible sequester, since this would introduce inefficiency and 

waste. Nor do we want to cut back on training, which would harm military readiness in a period 

when we face a complex array of national security challenges. In the charged budgetary 

environment in which we are operating, this type of error is very real. 

Finally, we understand that private companies that serve the Department of Defense and 

constitute important members of our national security team will be making decisions on issues 

related to sequester. They face many of the same dilemmas we do, and a number of them have 

expressed to me their alarm at such a wasteful and disruptive way of managing the taxpayers’ 

money and the talents of their employees. The best thing that can happen for private companies 

is for Congress to enact a balanced deficit reduction plan that halts implementation of this 

inflexible law. 

Summary

I believe that my testimony today makes clear that sequester would be devastating to 

DoD, just as it would to every other affected federal agency. It is important to remember that 

sequester was not a policy designed to be implemented. It was enacted as a prod to Congress to 

act on the federal deficit. 

 

Congress needs to deal with the debt and deficit problems in a balanced way and avoid 

sequestration. The men and women of this Department and their families need to know with 

certainty that we will meet our commitments to them. Our partners in the defense industry, and 

their employees, need to know that we are going to have the resources to procure the world class 

capabilities they can provide, and that we can do so efficiently. Allies, partners, friends, and 

potential foes the world over need to know that we have the political will to implement the 

defense strategy we have put forward. 
75 

OEPI,fTY SECRETARY OF OEFEl'lSE 

1010 D£F£I'ISE PEI'ITAIMlN 

WASHINGTON. DC 20301-1010 JAN 1 0 201 l 

MEMORANWM FOR SECRETARIES OF mE MILITARY DEPARTMENTS 

CHAIRMAN OF TUEJOINT CHIEFS OF STAFF 

UNDER SECRET ARlES Of DEFENSE 

DEPUTY CHIEf MANAGEMENT OFfiCER 

DIRECTOR. COST ASSESSMENT AND PROGRAM EV ALUA TlON 

DIRECTOR, OPERATIONAL TEST AND EVAl.UATlON 

GENERAL. COUNSEL OF TIlE DEPARTMENT OF DEFENSE 

INSPECTOR GENERAL OF mE DEPARTMEIoIT OF DEFENSE 

ASS ISTANT SECRETARIES OF DEFENSE 

DEPARThtEIoIT OF DEffNSE CHIEF INFORMA nON OFFICER 

ASSISTANTS TO TIlE SECRETARY OF DEFENSE 

DIRECTOR, ADMINISTRA nON AND MANAGEMENT 

DIRECTOR. NET ASSESSMENT 

OlRECfORS Of nu;: DEFENSE AG9<lCIES 

DIRECTORS OF lliE DOD FIEIJ> ACTIVITIES 

SUBJECT: lIandling Budg<'l8ry U...:~my in Fitcal '1_2013 

Two IIO\l%«$ of .........unnlY are <""'hna bl.daewy chaJlen3es for 1lIe Departm.." of Ocr ...... 

(DoD) iD lOll. TIlt first is tho fact lhaI tho Departmenl is opeflIIillll under • Conlinuina R...,hlli.,.. 

(CR) through .' ~ Mart:h 27. :roll. 8« .... most oporatin& fuoding was planned '" increase 

from fiscal Year (FYJ :rol2 '" FY 2013. b.n is inslead bell111 held II FY 2012 ~'eb UDder tho CR. 

funds ,,;11 "'" ""'""' 0=1 _ of ""peniliture if tho CR oonlin .... lhrough tho' end of tho f!$Cal 

)'Ur it! its curr<nl fonn. Tht Seaetaty will contin ... ", llrie Iho Congress 10 enact III'J>I"OIII"iIlions 

bills for FY 201l. BUI if1lleCR .... '" 10 be ""tmded 1hrough tho end of1he fi....al ~ar. il would 

binder our ability 10 ..wown I ready fmu. 

Tht second .0 •• "'" of WICCftain,y is tho potential scq~ recently dtf""""'[ from 

Jonuary 2. 201l1O Marchi. :roll by tho Amerio ... ToxP'l)"O' Relief Act of2012. Tht possibility of 

scq....-strOtion occwrillllU lale as tho bcPnnillll of tho si><\h mo,"" of tho fi....al yur "«,/lin 

sianific.anl odc[i,ionaIl'IICeIUinly for tho manaaemenl of tho Departmel!l. 

Eilhor of those problems, in isoillion. would presenl ocriouI budget e=",ind oball""ae$1O 

tho Dcpar1rn<n'. ncpti~e!y Impaet!ni n'adinrss and ~llilli in oIher undesirable ou'comes. Thi. 

si.UIlk>n would be made e'..., more cballeflilng by tho ......t 10 [I<Ol«1 funcb for ":ani",,,...,.....,ions. 
76 

Nw-Tsrn\ Ac,ioM 

Gh-.,.!he ",-endl budgetary WlCCnainty faced by !1M: DeparUnem. and in pIIr'I"'ullu!IM: 

immediate opcntional i_ ~ntod by Ill. CR, it i. prudent to tak~"""';o steps now in oro.. to 

help ovoid om_ future probI........ I ther-ef"", authorize 011 Def ..... Compnnents to begin 

impl~tina mea>Umllha, "illl>olp mitigate OUl' budgrt ,,,c,,,,,i,,,, risks. For now, ODd to tho 

cx!eflt pooaiblc. any octio,," taken mILU be teVenible al a lata d8!o: in the .,...ent thai Congt~ .. IS to 

remove tho risk< I ha,~described. n.. o<ti<>n5 sbouId be W\lCtured to minimi"" Iwmful ~ffccts 011 

0'" p<Xlplc ODd on operatio,," ODd unit readine ... 

Ca!¥ritsoflppr", .. ed .. tions"", ideotifltd inT bl~ l. Th< lUllIorily 10 implemrm Ibe$c 

octions sholl remain in effK1. until thoy"", n"VOked in 0 rubsequt1l1 memorandum ITom my office. 

IfCompooenu belie,.., they m..st take octioru tI>*! go beyond thoco.I"iori .. hSlM in Tobie I, llIey 

should preoent !he options for my ",vie", and OWO,-a/ prioo- to !heir implemenwi"". 

IDlm,<ifiql PlaooinR ['" I&ow-Jsrm Budgrtary Unmtajnty 

Givetl !he odd<d thai I"",. (>f. I'OIefItiol :ltqU<$lJ8!ion in M=h. ,,-e m<$ ...... inlcn5ify 

orr"". 10 plan f"'lIfe octioru that mi&ht be ""lllired should thai happen. This planning doe< "'" 

""""'" """" ""fonuna,. e.'on" will OCCUl'. ""If IM!"~ must be ",ody. 

M they formu]"", draft pi..,., Components should follow the IjUidar>ce tIIIt di"",,, !he 

Depa:UDCllll0 take 011 pooaible steps 10 mitigal. harmful effeelS ossociated "illlthi. budgewy 

wx:ert&intyond to maintain . """"II <lefense. Th.e de1ails of!he guidance .... "umnwi7.t'd bel"w; 

F", the openl1ing portions of!be 000 budgot' 

(> Exempt 011 military ",_I fuJ>ding from ",,!\ldln>licn redUCI i<>~ in M:Wrdanc. 

"ilh tho decision made by lh. Pm.i<km in July 20 12. 

" fu.llypmt«;1 funding for "Mime DpCMions. 

o fullypro1«t Wollll<l«l Wanior proJVam$ 

o To !be ex"",t ~ible. pro!«l programo II>M cI .... ly associated wilh !be new 

def ...... "",elO'. 

o Red..;c .i';li"" ",,,,Hora: ClISt< usi"i !he (ollowi0il "",ions (.11 ... b;c<:t to mi ... oncritical excmptiCll$. ~ oppropriate consultation "ilb union represetJtati,'ts 

consi!ll"'" with Ex=ti .... Order 13522), 

Rclea.<e 1<mpO""Y employtt. ~ dQ IlOl .......... tcnn hi=. 

Impose hiring f=-_. Autharizc ,-oluntary .. panuion inccnli,-.. 000 voluntary utly .etirm>on" 10 !be 

ex!enl feasible. 

C~!be pM$ibilityoffwiougMofuplO 30 cok-r>dot dayso.-21 

di"co.uin..,.,. workdays. 

o To !he oxttnt fe4$ibk, proIed family ~ 

, 
77 

(I To the e~l<f1! r.-.. ib/ •. proI«1 fundio& IlKISI. di=lly _iau.:! with ,...",du....; foc"," 

tho DtCtUII)' CUll on Iltcr dqOOying unil1 

FOl' the ;"''ntmen! portions or the DoD budg.! (procumnml. RDT.tE, oonstnlCtioo): 

(I Prole<:! investments fimcIed in Ov ....... Con'ingmcy Opentioru if _i.,011 with 

""enl opentiOMl ....rus. o To the exl<f1' f....uble. ptOleCI programs mosdy~l_ly l$SO<iated with the DeW 

<kf<1lSOS!/1Il.IIY. 

(I Toke prudenl steps to minimize: disruption and odded oosts (e,i-. ovoid pmallieo 

_i .. 011 with poIelnial COn""", ~ ..... lIanon. .. -ben: feasible; prud.ndy manage 

COfIStl\lClion proj«ts fur.:Ied with prior.~.,. moni",>-

Whik we "'" hopeful of "'oidins bud~ary prob!orM. draft C""'P""<nl pi ..... l>ouId ren"", 

the possibiJiI}' !hal we .... y """ to openue under I )'<"ar·long CR and ,bat ""'Il>CSInlion takes place. 

Table 2 shQ,."'$ the I~ ofinfoonation !hal should be in<1"""-'<l io Ihe pi ..... ComponroU Ilhould 

submil these draft plans 10 the Under Secretary ofDer....., (Comptroller) by February I. 2013. "I"bc 

Under Secretary of o.f._ (Comptrollet) will worlc "ilh the Comp<>netlts 10 odjUS! Ihis JCbedule if 

chang'" ore required due 10 Ihe deadlines for the preparation oflhe FY 2014 Presicknl·. Budie' 

submission. 

I apprecilllC your patimc. as .. ., worlc 1luo<Ip ~ difficull budi'U"Y 'imes. The 

o.partmm, will """'i ..... 10 do iu bnllO re3Ol .... !hex budaewy uncertainlies in I manner that 

permirs .... to SUpp>M our..um:m <lcr....., JtrakIlY and mainlaiD a $1100& def._. 

If addre$scU have q....u.:... obour this memorandum. they Ilhould dired them 10 the Un<Icr 

'"-"~"-(C~~{;;L ~ a~ 

Anachmcms: 
78 

Tobie I. COl<lon .. of App ... ~«1 N ....... T ... lIII AttM>D' 

Free"" civilian tUring (with .xceptions (or missiorKTilical acli>iti .. ·). 

Provide authority 10 ....... i ... e .... p\oyInent of It"mporary hitet and 10 notify term .... plo)'ft. 

!hal tbei. coo,""," will MI be renewed ("ith exceptions for mission-cri1ical att;';ti .. and 

"ilea appropriale ill term. ofpetWDDl'l timiog'). 

Rod""" base oper&tin& funciiD&-

CunaiI1l1l>cl, IrIlini",. and conf<.TellCCll (all with <?1c<ptions for mi$sion-airio.ol activi.i .. • 

inchoding tbose rt<Iuin:<! to maintaio prof.";onalll"",,",,", or equivalent eenifiealions). 

Cunail facilities mainl<lW1C<: or facililles SustAinment, RestoralioJl, and Modernization 

(FSRM) ("ith .xceptions fur rrus-ioo...,,;.ioai ac1ivi.ies·). 

o lfnecessar)'. ,"!"IIkes/alenti ....... uthorilCd 10 fund FSRM at 1 ... ·.10 bek>w current 

gwdance . 

Cunailldministrali,,, expellSO'l such .. "'pply p.m:hase$.. busine<$ IT, ""remoni.., etc. 

(wilhex.<ptioru fur mi";""..:ri.kol ac1ivities' ). 

Review c:ontr"octs and ....me. for p<)ssible COOI-$Ovings. 

Cancel)" aod 4" quaner ship ma.i~ . ,-";Iobiliti .. and y;,,~oo and Jround depol-

~I maint ....... eac1lvi'; ... Take thts oction DOea.littt'- February 15. 2013. 

Clear all R&D and production cootrac11 and conmoct modificalions 1lW obliptc more !han 

S500 million with the USD(A T &L) prior 10 . ",:ard. 

For Soi"" •• and Teehr>ology aooounu, provide the USD(AT.tL) and the Assistant Seen-tary 

oflkf ..... (Rexarth .t Engi........mal with an USMsmtnt of the Unl*t that budg$!)" 

~ty mo.y ha"., "" meetiflg ~Lll ",search priorities. 

• Approvab wiU be: II1Mted by CornpOn<ll1 ~I or by "";or offi.iaI, do.ignated by the 

Compon<"l1t beM. 

CompOnm" with penonnel serviog Combillartt ~ (COCOM$) must OOII$wt with the 

COCOM. bef"", impiementi"i act;"'" !hal arr""t them. Disputes "ill be brouahl lO \he atlalt;"" 

ofth< Chairman of the Joint OIkrs ofStIIlf for filnh<r .-.:solution. 

Comp<>r><1l1! m:civiflg rcimbwxmcnl! """'-'!d coordinao. with e»>t<>mer before taking actions lllat 

would alf""t the CU>lOrncr'. mission. 
79 

Tl bk 2. Infnrml.ion .o Ik Inrludtd 1ft Drart Implemen'a,IOD PIo ... 

The roll"",i"ll information should ~ provided at .be Componen' I~"L [nf..",...uon by commands 

and b8set/""u1lrtions i. no. requirtd. 

For .,.,.ral;n8 a<rounlS, identify "'*" a<tioru to include. ••• minimwn: 

o Ex'<1l' of d.ili.., hiri"ll f...,....; .. pe<:ted nwnber of '"",polk""" ~kutd; "pe<:.td 

nWllber, duration. and l'1li...., of furloughs. 

o RtdL>C';OOS;n flyiollhouro, mamina do)'s. ,'.hide miles.llldother 

OpenIion$ltrainini/suppon ""'oh'ilies \hat affec. r""", readi ....... 

o Alcas ofbudg<1S e'peri<r>e:ina di>proporlianale cuU. 

For investment accoums: 

o Plans fo<l~ programs (ACAT ID_ IC, _ MA!S propams). 

• Incl ..... ~Of changes in uni. buys. delays. etc. 

o Siarur.canl ciani" in all join! programs. 

lden1ify _ prioritize MY esoenoial tqlrOiJ3llUOi"ll ac:.ions \Oil/> off,..... 
80 

SECRETARY OF DEFENSE 

1000 DEFENSE PENTAGON 

WASHINGTON DC 20301·1000 

MEMORANDUM FOR DEPUTY SECRETARY OF DEFENSE 

MAR 1 5 2013 

SECRETARIES OF THE MILITARY DEPARTMENTS 

CHAIRMAN OF THE JOINT CHIEFS OF STAFF 

UNDER SECRETARIES OF DEFENSE 

CHIEFS OF THE MIL ITARY SERVICES 

COMMANDERS OF THE COMBATANT COMMANDS 

DIRECTOR, COST ASSESSMENT AND PROGRAM EVALUATION 

GENERAL COUNSEL OF THE DEPARTMENT OF DEFENSE 

SUBJECT: Strategic Choices and Management Review 

The Department of Defense must constantly examine the choices that underlie our defense 

strategy, posture, and investments, including all past assumptions and systems. This will be 

especially imponant in the period ahead. as both budgetary and strategic uncenainty affect our 

planning. We must think and aCI ahead oflhis uncertainty, and not in reaction to il. 

Accordingly, I am direcling the Deputy Secretary of Dcfcnsc. working with the Chaim18n 

of the Joint Chiefs ofSlaO". to conduct a Strategic Choices and MQllagement Review. This review 

will: 

Define, for my consideration, the major strategic choices and institutional challenges 

affecting the defense posture in the decade ahead that must be made to preserve and 

adapi defense strJ.tegy and management under a range of future circumstances. 

Consider the 2012 Defense Strategic Guidance as the point of depanure and be 

infurmeu by Ihe Chuinnun's Risk Assessment. The results will frnrm: my Fiscul 

Guidance for the FY 20 15 budget and ultimately be the foundation for the statutorily 

required Quadrennial Defense Review due in February 2014. 

Bc inclusive but confidential to allow for the free exchange of ideas. Service 

Secretaries and Chiefs, Office of Secretary of Defense Principals, and Combatant 

Commanders will serve as essential participants. 

This will be an iterative process, reponing to me at regular intervals with the aim to conclude the 

process by May 31, 2013. I appreciate your eITons and suppon in this process. Thank you. 

~ I~~ mllllllll~i m~~!~jU 080003024-13 
81 

DEPUTY SECRETARY OF DEFENSE 

1010 DEFENSE PENTAGON 

WASHINGTON . DC 2030 1-1010 

MAY 2 9 2013 

MEMORANDUM FOR SECRETARIES OF THE MILIT AR Y DEPARTMENTS 

UNDER SECRET ARIES OF DEFENSE 

CHIEFS OF THE MILITARY SERVICES 

COMMANDER, U.S. SPECIAL OPERATIONS COMMAND 

SUBJECT: Strategic Choices and Management Review - End State 

I appreciate the thorough discussions we have had at the Strategic Choices and 

Management Review (SCMR) meetings, and am sending out this additional guidance to clarify 

our end states and discuss the near term due outs. Let me begin by emphasizing that the 

Secretary and I remain fully committed to the President's defense budget proposal for FY 2014 

and the out-year budgetary levels that accompany that proposal. This budget providcs the 

appropriate level of defense resources needed to meet today's complex national security threats. 

Moreover, the President has proposed a balanced package of deficit reductions, including some 

further euts in defense funding, which exceeds the targets in the Budget Control Act. It is our 

hope that Congress will work to enact this proposed package of deficit reductions, or anothcr 

package that the President 'can sign, and then replace sequestration. 

We will also continue to defend aggressively the specifics of the President's FY 2014 

defense budget proposal at the right level for the Departmcnt. However, we do need to develop 

options in the event that fiscal realities differ from the funding level in the President's budget. 

Therefore, a critical output of the SCMR will be internal fiscal guidance for POM 15-19 

at the President's Budget level. This guidance will be infonned by the SCMR and take into 

account adjustments needed to bring the DoD topline into compliance with the President's 

budget. Because we do need to develop options in the event that fiscal realities differ from the 

funding level in the President's budget, a second output of the review will be separate guidance 

for Alternative POMs (ALT POMs) at overall Departmental resource levels five percent and ten 

percent below the resources provided in the President's current budget. Each Service will be 

provided topline guidance informed by the SCMR work which takes into account the full 

sequestration cuts. 

You should also develop options for a FY 2014 budget that is executed at levels other 

than the level in the President's budget. Specifically, you should consider two assumptions: (I) 

a cut of 10 percent from each appropriation level proposed in the President's FY 2014 budget 

and (2) a cut of 10 percent for the total dollars proposed in the President's FY 2014 but with 

authority to move money among appropriations. Finally, we need to know the adjustments to the 

President's budget submission for FY 2014 that would be necessary to take into account the 

currently experienced impacts of the FY 2013 sequestration. These results are due by July 1. At 

a later date we may need to ask for an alternative at a level 5 percent below the President's 

budget. 

OSD006303-13 
82 

We will also be: "'"oong On additional strategic suidance mat will be: incorponlled into 

Our SCMR products. First, the outwmeofour mnkinsofthe ",fined DSG military missions will 

indieate pountial break points for capacity, capability, and readiness that will be: important as 

you shape your fOr=! to mpport strausic ends. Second, USPACOM is producing a rapid 

turnaround adjustment to plans in the Pacific theater. 

Fi""lIy ..... e will produce a Whiu Papcrthat documents the options we considered and 

thei, implications for both management and strategy. 

~. 

Chairman of the Joint Chiefs of Staff 

Commanders of the Combatant Commands 

Chief of the National Guard Bureau 

, 
83 

The HOllOrablc Carl w in 

Cllairm"" 

SECRETARY OF OEFENSE 

1000 OEFI!:NSE f'ENTA"ON 

WASHINGTON. DC 20301 -1000 

Comrnincc on ArmN Sen;ce. 

Uniled SIAIO. Senale 

Washingfon.DC 20510 

The Hooorable James M_ Inbof. 

RankingMember 

Commitlce on ArmN Service. 

UnifN S1.:Jles Sen ... 

Woshinglon, OC 20510 

DearChainnan Levin and Ranking Member Inbof.: 

JUt 1 0 2013 

1 remain fully commitlOO 10 cnaclmenl of "'" Presidenl '. defense budgel for Fiscal 

Year (1''1') 2014 because I believe Ihi. budge1 provide. lbe righl level of resources 10 

mainlAin a "'rOllg nalional defense. I . Iso fully ,upport lhe P=iden,', overall budget 

plan olld hi. FY 201 4 budg""''Y p""""",b for otl= federal agcn<i .. , ,,-!lich ore ""="'Y 

10 ,uJ>POrt. 'IronS ecollOmy and also contribute 10 . strons nafional defense by providing 

support to """ tmol"'. "C1crnns. and their f_ilics_ 

I realize, however, llIal ~te Depal1menl of Defense (DoD) need. a conlin~en<y 

pi.., in the event thai tbe SC<jocster.lovcl budgdary cal'" currently impo$cd by lhe Budgel 

Conlrol Act (OCA) of 201 I ",main in efTecl. These cal'" would lead to OIl approximately 

SS2 billion cuI 10 "'" DoD budget o_pared 10 lhe Pre,ident'. FY 2014 funding req""st, 

as ",.11 •• deep colS 10 non-def"" .. priorilie. in<luding OO"""ioo, inf,..structure, 

innov,uion and "",re, Th. atlachmrnllo ilii.leua provide •• high.b'd .ummory ofan 

early "ersion of DoD's conlingency plan for FY 2014 with. SS2 hillion cul. 

I S1rongly oppo:;>se culS oflllat ma",ilude be<:ause, if they remain in p lace for FY 

2014 and beyolld, lhe .ize, readiness and lechnologic.1 supcriorilY of ou, mililOly will be 

reduced, placing al m""h greater ,i,k "'" country' , abil ilY to meet our cu""nl national 

","urily commi1menls. This Ou'COme i. unac<:<:plabl< as it ",,,uld limil the country's 

options in the e"enl of a major new ".lion.1 security conting.""y. 

These "";OltS ad"erse elTeelS ""cur .''en if Cons"'" provide' O.~ibi ily in 

administering budS" outs and seq ... "".tion, FleKibility in iliis instance would mean 1h.u 

Conue .. appro,'e. proll'""" <UIS denied in the pasl and .lIow. rew lotalion of funding, 

",ithout regard to exi"ins budgel "l1.Iolur,," or limi13liolo on InII\sfcr .u,herily_ 

However, the oulS am foo """P and .brupt 10 be mitigated by flexibility, no m,11cr he", 

broadly doflned, These points am "'ell il lU<1raIN by looking al the cfTccu or. $52 

billion out in FY 2014" 
84 

• With or without additional flcxibilily, the Departmmt would not be able 10 

substantially redu<:e military ~I COSIS in FY 2014 without drxonian 

Ktions -a o;onstntint that significantly wonens the pressure on other budgdlry 

accounts and saves v~ry link: money UpfronL 

• SeqUe$tration in FY 2013 is severely damaging military readiness. In FY 2014 

the Department would seck to minimiz.ecuts in the day-to-day operating costs 

most closely related to traininllw readiness. Ill!itead DoD would, for the second 

year in a row, impose hirinS ~ and slwply reduce facilities maintenance -

sometimes leaving the Department with too few people to perform Deeded work 

or with employees wortina in subswidard coooitions. The Department hopes to 

avoid a second year of futlou&iJs of civilian personnel, but DoD will have to 

consider involWltary redllCtions-in-fora: to redu<:e civilian personnel costs. 

Ho~ver, these actions alone would not be sufficient. Given a cut ofSS2 billion, 

even with flexibilily in administration, training and ove .... 1 readiness would at 

best remain constant at clllTt1ltlow levels and, in some CaseJ, would continue to 

decline. 

• The difficulty of substantially reducing military personnel funding in FY 2014 

would likely requ.ire d.isproportion.l.tely large cuts in the Department's investmenl 

accounll - assuming flcxibilily in implementing eMnScs, WIS of I 5 to 20 pcn:ent 

would be common. The RSultina: nwked slowdown in modernization would 

reduce our long-lenD, critically important w historic technological superiorily 

and Wldermine oW" better buying po_r initiatives. 

• The bottom line: with or without flexibility, administering a $52 billion cut would 

have severe and UlIlICCC"ptable effects. In particular, ;fsuch a cut and the sequestcr 

mechanism _re applied to military persoruICl fundina, DoD could accommodate 

the required reductions only by putting into place an CJltremely seven: package of 

miliwy pe1$Onnel actions iDeluding halting all accessions, ending all penn_ntchange-of-$lation moves, scopping discretionary bonuses, and froe2:ing all 

promotions. 

Part of the solution to the current budgetary impasse will require that Congress 

become a full partner in cooing busineSS-lIS·usual practices - in areas such lIS 

infrastructun:, benefits and procurement - that would otherwise require funhetcuts to 

readiness.lllOdemization and combat po_f. We urgently nee<! Congressional support in 

enacting diffieult but necessary measures proposed by the President in his FY 2014 and 

prior budidS. 11lcsc include slowing iJ"Owth in military pay raises in a rnannerthat still 

suppol'lJ the all-volwueer fom: and raising fees for health care programs for ~ 

while still maintaining the gencJOllS benefits they deserve. Other key initiatives include 

the retirement ofsomc lower-priority weapons, includina Navy ships and Air Fo,"" 

aimllft. The Congress also needs 10 eliminate n:strictions on the ~te of the dmwdown in 

military end strength for the Army and Marine Corps, permit the Department to eoo 

programs such IS the C-27 airc~ft, and enact other cost-saving proposals, such lIS a new 

BRAe round. If Congress does not .pprove these proposals, even more cuts in combat 
85 

powi:r. ~adiTN:SS and modmtization would be needed to ICrommodat~ ,uts ofS52 billion 

in FY 20 14 and similar cuts in Later yurs. 

In sum. the abrupt. deep cuts "used by the DCA cap$ in FY 2014 wiLl force DoD 

to make non-strategic changes. If the cuts continue. the Department \\ill ha,-e to make 

shill'p cuts with far reaching consequences. including limiting combat power. redueing 

readi"",ss nd undenni ni ng the nntional security interests o{the United States. I directed 

a Strategic Choices and Managcmi:nt Review to del'e lop options that would 

accommodate these large cuts. but these options cannot avoid serious damage to our 

mililllry capabilities. 

lkuuse of my ~at coocem reprding!he effects of reduced discretionary caps 

in FY 2014 and beyond. I urg<." Con~ 10 pass a balanced deficit reductioo package that 

the President can sign that would ~placc t~ de<:p and aroitnuy budget cuts in FY 20 14 

and in future years. A comp~hcnsi\'e solUlion of this nature would do much to suppon 

the mission of the DoD and the mission of other federal agencics. including agencies thnt 

provide imponant support 10 the Depanmenl and to our lroops and veterans. 

In coming monihs. my senior Icam will provide briefinil and updated infonnatioo 

on the FY 2014 budget to !he Commillec. I look forward to working on this critical ss~ 

wilh both of you, the Smate Anno:<! Services Commiuce. and mcmben of Con~ss. 

Thank you for your continued support of O\lf mc:n and women in unifonn and our 

enlire civilian workforce. 

Anachmmt: As SUIted. 

Sincerely. 

~ IrfMeL 

/ 
86 

ATTACHMENT 

Contingency Plan fOT SS2 Billion Cut in FY 2014 Defense Budget 

Secretary Hagel n:mains fully committed 10 enactment of the President's budget 

plan for Fiscal Ycar 2014, including his budget proposal for non-defense agencies and his 

defense budgct proposal. The President's defense budgel provi<les the re$Ource.s thaI the 

President and Se<:retary of Defense believe arc appropriate to maintain a strong national 

defCIUC in the face of complex nalional securily challenges. The President's budget 

proposal is coruistent with the caps originallY imposed by the Budget Control Act (BCA) 

of2011, wtLich led to a 1m-year mluetion of$4g7 billion in Departmenl ofDefCJUC 

(DoD) budgets, and the American Taxpayer Relief Act of20l2. However, provisions of 

the seA, when coupled with the failure ofCongn::ss to enact. deficit mluction pac:lr:age 

in 2011, have led 10 additional mluctions in the BCA caps (referrod to as ~sequcs\erlevelH caps). 

The sequester-level BCA cap reduction for FY 20 14 would result in a eut ofSS2 

billion in funding in FY 2014 compared with the President·, budget. If, CODtrary to the 

administn.tion's intent, these sequester-level BCA caps remain in effect, DoD would be 

requimllO make major changes 10 its eurrent plans. The plan 6e$cribed in this 

attachmenl provides a high-level slllDl!W)' ofan early ver1ion orOoD's approach to 

operaling al those lower budget levels. All funding euts in the plan refer to changes in 

000'1 base budge!. The Department assumes thaI funding for Overseas Contingency 

OpeBtions (OCO) remains al the level requested by the President. 

In fannulating this contingency plan, DoD is being guided by inputs from the 

military serviecs and defense agencies and by the preliminary results of the Strategic 

Choices and Management Review (SCMR). The SCMR WIllI directed by Secretary Hagel 

and sought, in the limited time avail.ble, 10 scrutinize every aspect of the U.S. defense 

cstablisbmenllO eroable the most sensible adjUSllneots assuming various levels of 

rcsoun:e reductions. AI the same time, the SCMR s«u 10 adhere, wherever possible, 10 

the lenets of the Defense Sntegic Guidance (OSO) such as the rebalance 10 the Asia 

Pacific. 

While the SCMR was principally oriented 10wards the FY 2015-2019 budget 

submission, its principles and findings arc applicable 10 FY 2014 contingency plans. 

Accordingly, wherever possible DoD would s«k management efficiencies and controls 

OD compensation growth befon: makin& cuts to force structure, moderoization, and 

rcadine$s.. Nonetheless, Wlder lilY vemon of sequester-level BCA cuts, reductions to the 

lanereategories will be requ.in:d.. Moreover,the depth and abruptness of the reductions 

rcquiRd to fit under the post-scquestn1ion cap would, even with flexibility, substantially 

limil our ability 10 implemenl those cuts in a Wly thai fully protects the tenanlS of the 

OSG. 

Of note, one oftbe billiest challenges in formulating our plan for FY 2014 

involves uncertainty n:garding post-FY 2014 bud&etary cuts, especially large cu\.! such as 
87 

!hose wt wuld ocxur WIder the Curmlt ~rsion of !he BCA. What is assumed can 

determine key doc:isions such ., the timina of penonnc:l reductiOlU. 

As mjlleStcd, OoD's wnlineency plan ~ the effoc:ts ofseql.leSter-level 

cuts 0($52 billion assuming Congres1 grants DoD flexibility in implementing the 

reductiolU. Flexibility would mean that Congress approves program cuts denied in the 

past and allows reallocation of funding, without regard 10 exisling budget $trU(:1U(eS or 

limitations on transfer authority. Howevcr, cven with such flcxibility, OoD would not be 

able 10 mitiptc thc significant and detrimental impacts associated with seqllCSler-level 

~". 

DoD's contingency plan addresses !be effects on each of the Department's rMjor 

categories of fundill&. 

Mjljwy PcuoMcl Effoc:ts 

Even iffaeed with the largc and steep CUI 0($52 billion in FY 2014, DoD would 

likely be ablc 10 impose only relatively modest cuts in CWTCJ\tly planned funding for 

military personnel, assuming it had the flexibility to limil the size: of those C\its. Military 

personnel funding cuts would be dispropof1iOflltcly small (probably only ' fcw percent of 

total military pel"3OllnCI funding) becIIuse reducing the size of the military yields 

relatively small Slvings in FY 2014. Even involWl\ary separations of military penonnc:l 

save little in the year they occur because ofldded costs associaled with separation 

payments for those with more than sil( yean of service along with added travel costs, 

costs for paymcnts ofWluscd lcave, and in somc cases unemployment inslll1l!lCC co~. 

Achicving a proportional, 10 percent cuI in military personnel funding in FY 2014 would 

require w t DoD put in place an extremely severe package of military personnel actions 

includina haltin, all accessions, endina all permanent-change-of-$lation moves, stoppina 

d.isereUonary bonuses, and fi-eezina all promotions. 

The inability \0 reduce military personnel costs quickly would put additional 

downward preuure on other portions of the FY 2014 budaet. To avoid, repeat of this 

situation in future years, DoD could dn.w down the size of the military more quickly 

beginning in FY 2014 in ordcr 10 fitt up resources in laler years. To permit a more rapid 

drawdown, Congress would need to repeal lalYJ restricting the military end strength 

reductions in the Army and Marine Corps. A substantially fasterdrawdoWD would 

probably require significant numbers ofinvolWltary separations in FY 2014,. doc:ision 

wt raixs the unfortunate prospect of fort:ed scparatiOJl$ of pel"3OllnCl who have recently 

served in AfghaniSWI. 

lmplcmcntin8 sequester. level cuts would be rmde evm more difficult if Congress 

fails \0 support the military pay n.isc of 1.0 pcn:cnt proposed in !he President's FY 2014 

budget. If that n.ise grows to 1.8 per«nt, as some in Congress have proposed, it would 

add pbout $0.5 billion in FY 20 14 fundin, requirements - which would fOKe even larger 

cuts in other spending categories. 

2 
88 

Effects on Opmtjon and MaimeAIIKjC and Re!odincss 

Reductions in day-to-4ay operatina o;osts, whi<:h ue finaneed out of the operation 

and maintetWlCe (O&:M) appropriation, would pose particularly diffieult problems in the 

event ofa $52 billion <:ut - even with flexibility. O&!M fllWlU!l much ofthc cost of 

traininll and readiness, both ofwhidl have already been $eVerely afTe<:ted by the FY lOll 

sequester. 000 needs additional FY 2014 funds, not further culS, in order to rerover. 

The O&:M appropriation also pays for most of the Department's civilian personnel, who 

have.Jnady been hit with a series ofpay freezes alonll with furlou8hs. For all these 

reasons there is strong pl"CSSUl"C to increase O&:M fundin&-

Despite this pressure., O&:M filndinll eouId not be protected if 000 had to 

aa:ommodate a reductionofS52 billion in FY 2014 bttausc this appropn..!ion makes up 

almosl 40 percent of the budget in FY 2014. Indeed, most servi~s and agencies would 

likely cut O&'M by roughly 10 pc,"nt - the same siu as the cui in the IOIal budget - and 

some would cut O&'M by even more. Wherever possible, O&:M culS would be achieved 

through reductions in funding for activities s\lch as faeilities mllintenance, base operating 

funding, and support to cotnmu.nity events. While less directly related to readiness than 

training and maintcnan<=e, these fundinll culS cause significant harm. Cutbacks in 

community suppor1 hurt rccruitinll elToru and disrupt or hah community activities that 

belp bllild boods between the military and local citixeJu. Limits on FY 2014 facilities 

maintenance, especially in the wake ofsharp cuts in FY 2011, would.&110 the list of 

facilities that need work. A military that prides itself on tcehnical superiority wovld 

incrusing.ly have to ask its workforce 10 labor in substandard faci lities. Overall these 

vario,,", a<:1'DIU would reduccjobs in I«al <:olI\lnwoities, iucl...J'ulI """"y juh. in smalt 

businesses, and so contribute to diJr\lpting commWlity life in ,"as near military bases. 

Cuts in O&M funding would also affect OoD's civilian worldorce because many 

civilians are paid with O&M dollars. DoD is boping to avoid furlou8hs ofcivilian 

penonnc:l in FY 2014, but the Department might have to consider mandatory reductions_ 

in-foree (RIFs). As with involuntary sepantions of military personnel, RlFs don't save 

much in FY 2014 but would help accommodate funding caps in later·years. While 

painful, RlFs would permit DoD to make targeted eulS in civilian pcrsonnellcvcls n.ther 

than the more across-the-board C\lIS associllcO with furJo\l8hs. 

While 000 would attempt to protect the O&M f\lnding most eJoscly related to 

training and readiness, fUll protection would be impossible. Therefore most services 

conclude that military training and readiness would remain at cumntly deg:nlded levels 

or, in some cases, would even continue to decline ifa sequester-level cut ofS52 billion 

oocumd in FY 2014. For example, flCed with II SS2 billion cut in FY 2014, two Navy 

air winl' miKht DOt be able 10 achieve fUll flight hours and special operations units, 

which are key 10 c:owlter teJTOrism activities, would expcrimcc declining readiness. The 

Army, whidl this year has c:anecUed many of the culminating training events at its 

o;om"Not training centers, would have diffieulty avoiding similar cutbacks in FY 2014. 

The Air Force, which this ycar has had to stop all flying at abo\lt one third of its o;ombat_ 

coded active sqUlldroIlS, would sirpoiflcantly reduoe training at more than half ofilS active 

3 
89 

flyina Wlits. Maintenaooe cutbaeks would continue or worsen, threatening future 

readiness level,. 

These major cutbacks in military training and read~ are of peat concern 

primarily because they would reduce deployable U.S. combat power. In the event ofa 

major military contingency, they mialltleave the COWlUy without the ready forees needed 

to fiallt effectively. A lack oftnlinina also contributes to accidents. For example, data 

for pilolS show that those who fly for fewer hours experience .. an:ater mishap rate 

caused by pilot error. Simply put, training cutbacks Pl,lt our military's pilots at greater 

risk. Finally, training eutbacks hinder morale and our ability 10 retain our best people. 

Military pcrsonndjoin 10 train hard and, ifnecessary, 10 flallt the nation', wars - not 10 

remain idle because of fu.nding problems. M Chairman of the Joint Chief. of Staff, 

General Martin Dempsey, aptly stated: "Today's rc:adineu problem is tomonow's 

recntitina and retention problem. ~ 

Conan:ss should avoid exacerbating these seriOIlS trainina and readiness problems 

by accepting chanae! already proposed in the President's budact that hold down OkM 

spmding. SpecifieaJly, Congress should accept the TRICARE f~ changes proposed in 

the President'. budget. Otherwise the Department will be faced with rinding almost SI 

billion in additional O&M culS, which inevitably will fur1hcr hurt tra.inina and read~. 

Congress should abo permit DoD to immediately mire the seva! cruisers and two LSDs 

proposed for retirement - an action Wt wol,lld eliminate lower-priority ships and save 

about $0.6 billion in FY 2014 operating costs - and suppor1 the retirement of all Air 

Force aircraft proposed in last year's budget. DoD also urges the Conarc:ss 10 enact other 

cost·savina proposals made by DoD such as ending the C-27 aireraf\. program. Mit 

works to reduce nwnbers of civilian personnel, DoD would benefit from changes in the 

law in order to carry out reductions by targeting lower-performing individ...als. Finally, 

the Department hopes that Congress will SIIppor1 DoD's ~uc t for another round of 

Ba$e Closure and RcaJigruncnt (BRAC) in 2015. While BRAC will not save oear-tenn 

dollm, the past five BRAC rounds are now saving more: than Sl2 billion a year, and 

another round. will evenrually add 10 these substantial savings. 

Effes:ts 00 Modernization 

Given the difficulty ofc ... tting FY 2014 mililaJy persoMCI funding, to 

accommodate I sn billion eut in ilS toplinc, DoD would be forced to sharply reduce 

funding for procurement, RDT &£, and military construction. Indeed, cuts of 15 percent 

to 20 percent might well be necessary, even thol,lgh the total budget i, red ... ccd by only 10 

pm:enl The savices wo ... ld seck to protect most or all funding for a few programs Wt 

arc: mosI critical to the President's DSG. However, funding for hundreds of program line 

items, IlCIe and small, would hive to be cut significantly. We would be fon::ed to buy 

feWCT ships, planes, gtO\lIld vehielu, IIlCllites, and other weapons. Modific.tion 

programs would be cut sharply, eva! though these programs maintain the effes:tivcncss of 

older weapons. Nor would cuts be limited to buys of weapons. RClClrch funding 

represenlS more than 10 percent of the defense b ... dget, and many research projects4 
90 

includina those performed by universities and small companies - would inevitably have 

10 be scaled wk. 

Marked ~uts in investment fundi!\&. espet:ially if they eontinue for several years, 

would slow future te<:hnology improvements and may erod~ the te<:hnological superiority 

enjoyed. by U.S. f0l'«5. In some future eonflict.less capable weapons eould mean a less 

desirable miJiwy outcome and more ~alIuaJtie$. Investment ~utbacks arc ofpaltio;ular 

concern bee.use they would oco;ur during a period when many ~ategories of U.S. 

weapons are aging sharply. 

Slowing investment ~d also .,;lvenely affe<:1 DoD', efforts 10 improve its 

ao;.quisition practices and ~. better bu}'<:r. HliIIdfe(b orwupon. and support 

prognm line itenu, whi~b are now being bought based on stable and effi~ient acquisition 

plans, would be di5rUpted.. Unit costs would riK, reversinll SlIe<:essfuJ efforts in recent 

years to hold down Wlit CO$! growth or even ",veIK it. The disl1.lplion would spill over to 

defense indllSlry. Defense industry jobs would be lost and. all prime eon\ractors pull back 

won:: to protect their internal work forces, small businesses may experience 

disproponionately large job 10SSC5. 

, 
91 

Ashton B. Carter 

Deputy Secretary of Defense 

Ashton B. Carter is the Deputy Secretary of Defense. 

Previously, Dr. Carter served as Under Secretary of Defense for

Acquisition, Technology and Logistics from April 2009 until 

October 2011. As Under Secretary, Dr. Carter led the 

Department’s efforts to accelerate the fulfillment of urgent 

operational needs; increase the Department’s buying power; and 

strengthen the nation’s defenses against emerging threats. 

Over the course of his career in public service, Dr. Carter has four 

times been awarded the Department of Defense Distinguished 

Service Medal. For his contributions to intelligence, Dr. Carter 

was awarded the Defense Intelligence Medal. 

Dr. Carter earned bachelor's degrees in physics and in medieval

history from Yale University, summa cum laude, Phi Beta Kappa, 

and received his doctorate in theoretical physics from Oxford University, where he was a Rhodes Scholar. 

Prior to his most recent government service, Dr. Carter was chair of the International and Global Affairs 

faculty at Harvard University’s John F. Kennedy School of Government and Co-Director of the Preventive 

Defense Project. Dr. Carter was also Senior Partner at Global Technology Partners, a member of the 

Aspen Strategy Group, a member of the Board of Trustees of the MITRE Corporation and the Advisory 

Boards of MIT’s Lincoln Laboratories and the Draper Laboratory, and an advisor to Goldman Sachs. 

During the Clinton Administration, Dr. Carter was Assistant Secretary of Defense for International 

Security Policy. From 1990 until 1993, Dr. Carter was Director of the Center for Science and International 

Affairs at Harvard University’s John F. Kennedy School of Government, and Chairman of the Editorial 

Board of International Security. Previously, he held positions at the Massachusetts Institute of 

Technology, the Congressional Office of Technology Assessment, and Rockefeller University. 

Dr. Carter is a member of the President’s Management Council and the National Council on FederalLabor-Management Relations. He has previously served on the White House Government Accountability 

and Transparency Board, the Defense Science Board, the Defense Policy Board, the Secretary of State’s 

International Security Advisory Board, and the Congressional Commission on the Strategic Posture of the 

United States. 

Dr. Carter is a Fellow of the American Academy of Arts and Sciences and the American Academy of 

Diplomacy and is a member of the Council on Foreign Relations and the American Physical Society. 

In addition to authoring articles, scientific publications, government studies, and Congressional 

testimonies, Dr. Carter has co-edited and co-authored eleven books. 

Dr. Carter is married to Stephanie Carter and has two grown children. 
92 

Admiral James A. "Sandy" Winnefeld, Jr.

Vice Chairman of the Joint Chiefs of Staff

Adm. Winnefeld serves as the ninth Vice Chairman of the Joint Chiefs of Staff. In

this capacity, he is a member of the Joint Chiefs of Staff and the nation’s second

highest-ranking military officer.

Winnefeld graduated from the Georgia Institute of Technology and received his

commission through the Naval Reserve Officers Training Corps program. He

subsequently served with three fighter squadrons flying the F-14 Tomcat, and as

an instructor at the Navy Fighter Weapons School.

Winnefeld’s unit commands at sea include Fighter Squadron 211, USS Cleveland

(LPD 7), and USS Enterprise (CVN 65). He led “Big E” through her 18th

deployment, which included combat operations in Afghanistan in support of

Operation Enduring Freedom immediately after the terrorist acts of Sept. 11, 2001.

As Commander, Carrier Strike Group Two/Theodore Roosevelt Carrier Strike

Group, he led Task Forces 50, 152, and 58 in support of Operation Iraqi Freedom

and maritime interception operations in the Arabian Gulf. He also served as

commander, United States 6th Fleet; commander NATO Allied Joint Command, Lisbon; and, commander, Striking and

Support Forces NATO.

His shore tours include service in the Joint Staff Operations Directorate (J-3), as senior aide to the Chairman of the

Joint Chiefs of Staff, and as executive assistant to the Vice Chief of Naval Operations. As a flag officer, he served

ashore as director, Warfare Programs and Transformational Concepts, United States Fleet Forces Command; as

director of Joint Innovation and Experimentation at United States Joint Forces Command; and, as the director for

Strategic Plans and Policy (J-5) on the Joint Staff. He most recently served as the commander of North American

Aerospace Defense Command (NORAD) and U.S. Northern Command (USNORTHCOM).

Winnefeld’s awards include the Defense Distinguished Service Medal, Distinguished Service Medal, Defense Superior

Service Medal, the Legion of Merit, the Bronze Star, the Defense Meritorious Service Medal, the Meritorious Service

Medal, the Air Medal, and five Battle Efficiency awards.

Updated: 14 August 2011
DOCUMENTS SUBMITTED FOR THE RECORD 

AUGUST 1, 2013 

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SECRETARY OF DEFENSE CHUCK HAGEL

STATEMENT ON STRATEGIC CHOICES AND MANAGEMENT REVIEW

PENTAGON PRESS BRIEFING ROOM 

WEDNESDAY, JULY 31, 2013

Good afternoon.

Earlier today, I briefed key congressional committee leaders on the findings of DoD’s 

Strategic Choices and Management Review. This afternoon, I want to discuss these findings and

clarify the major options and difficult choices ahead.

I directed the Strategic Choices and Management Review four months ago to help ensure

the Department of Defense is prepared in the face of unprecedented budget uncertainty. 

Although DoD strongly supports the President’s fiscal year 2014 request and long-term budget 

plan for the entire federal government, the deep and abrupt spending cuts under sequestration 

that began on March 1st this year are the law of the land. Sequestration will continue in the 

absence of an agreement that replaces the Budget Control Act.

The purpose of the Strategic Choices and Management Review – which was led by 

Deputy Secretary Ash Carter with the full participation of General Dempsey, Admiral 

Winnefeld, the Service Secretaries and Service Chiefs – was to understand the impact of further 

budget reductions on the Department, and develop options to deal with these additional cuts. It 

had three specific objectives:

x Help DoD prepare for how to deal with sequestration if it continues in FY 2014;

x Inform the fiscal guidance given to the military services for their FY 2015 

through 2019 budget plans;

x Anchor the upcoming Quadrennial Defense Review, which will assess our 

defense strategy in light of new fiscal realities and the many threats, complexities 

and uncertainties of this new century.

The Strategic Choices and Management Review did not produce a detailed budget 

blueprint. That was not the purpose of this review. It generated a menu of options, not a set of 

decisions, built around three potential budget scenarios:

x The President’s FY 2014 budget, which incorporates a carefully calibrated and

largely back-loaded $150 billion reduction in defense spending over the next ten 

years;

x The Budget Control Act’s sequester-level caps, which would cut another $52 

billion from defense in fiscal year 2014, with $500 billion in reductions for the 

DoD over the next ten years;

x An “in-between” scenario that would reduce defense spending by about $250 

billion over the next ten years, but would be largely back-loaded.

It is important to remember that all these cuts are in addition to the $487 billion reduction 

in defense spending over the next decade required by the initial caps in the Budget Control Act 

of 2011 which DoD has been implementing. If sequester-level cuts persist, DoD would 

experience nearly a trillion dollars in defense spending reductions over the next ten years. 

To help DoD balance strategic ends, ways and means under these budget scenarios, the 

Strategic Choices and Management Review scrutinized every aspect of DoD’s budget, including: 

contingency planning, business practices, force structure, pay and benefits, acquisition practices, 

and modernization portfolios. Everything was on the table.

As I discussed last week at the VFW Convention in Louisville, four principles helped 

guide this review:
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x Prioritizing DoD’s missions and capabilities around our core responsibility of 

defending our country;

x Maximizing the military’s combat power by looking to reduce every other 

category of spending first;

x Preserving and strengthening military readiness, and;

x Honoring the service and sacrifice of DoD’s people.

Those principles, and a rigorous review process, resulted in packages of options that 

included management efficiencies and overhead reductions, compensation reforms, and changes 

to force structure and modernization plans.

Allow me to share with you some of the options the review identified in each area I just 

mentioned.

MANAGEMENT EFFICIENCIES AND OVERHEAD REDUCTIONS

A tenet of the review was that we need to maximize savings from reducing DoD’s 

overhead, administrative costs, and other institutional expenses.

For several years, DoD has been paring back overhead. About $150 billion in five-year 

efficiency reductions were proposed by Secretary Gates, an additional $60 billion in savings 

were identified by Secretary Panetta, and I submitted a $34 billion savings package in our latest 

budget. DoD is continuing to implement these efficiency campaigns. Despite much progress, as 

well as good efforts and intentions, not every proposal has generated the savings we expected, or 

gained the support of Congress – most notably, our request for a base realignment and closure 

round.

The review showed that DoD will have to do more in this area, even though it is getting 

more difficult to find these cuts and it can take years for significant savings to be realized. After 

considering the results of the review, I determined that it is possible and prudent to begin 

implementing a new package of efficiency reforms now – ones that should be pursued regardless 

of fiscal circumstances.

Some of these management efficiencies and overhead reductions include:

x Reducing the department’s major headquarters budgets by 20 percent, beginning with the 

Office of the Secretary of Defense, the Joint Staff, Service Headquarters and Secretariats, 

Combatant Commands, and defense agencies and field activities. Although the 20 

percent cut applies to budget dollars, organizations will strive for a goal of 20 percent 

reductions in government civilians and military personnel billets on headquarters staffs;

x Reducing the number of direct reports to the Secretary of Defense by further 

consolidating functions within OSD, as well as eliminating positions, and;

x Reducing intelligence analysis and production at Combatant Command intelligence and 

operations centers, which will also foster closer integration and reduce duplication across 

the defense enterprise.

These management reforms, consolidations, personnel cuts, and spending reductions will 

reduce the department’s overheard and operating costs by some $10 billion over the next five 

years and almost $40 billion over the next decade. They will make the Department more agile

and versatile.

Past efficiency campaigns have shown that implementation can be very challenging, so 

effective follow-through is critical if savings targets are to be realized. This is especially true of 

OSD reductions. I have asked Deputy Secretary Carter to identify someone from outside DoD 
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3

who is deeply knowledgeable about the defense enterprise and eminently qualified to direct 

implementation of the OSD reductions and report to the Deputy Secretary. 

In addition to the measures I’ve described, the review identified additional consolidations 

and mission reductions that could be required if sequester-level caps are imposed over the longterm. These measures include consolidations of regional combatant commands, defense agency 

mission cuts, and further IT consolidation. 

These changes would be far-reaching and require further analysis and consideration.

Though defense bureaucracies are often derided, the fact is that these offices perform functions 

needed to manage, administer, and support a military of our size, complexity and global reach. 

Even over the course of a decade, the cumulative savings of the most aggressive 

efficiency options identified by the review are $60 billion. That is a very small fraction of what 

is needed under sequester-level cuts. We will have to look elsewhere for savings.

COMPENSATION

The review confirmed that no serious attempt to achieve significant savings can avoid 

compensation costs, which consume roughly half of the DoD budget. If left unchecked, pay and 

benefits will continue to eat into readiness and modernization. That could result in a far less 

capable force that is well-compensated but poorly trained and poorly equipped.

Any discussion of compensation should acknowledge the following:

x No one in uniform is “overpaid” for what they do for this country;

x People are DoD’s most important asset – and we must sustain compensation 

packages that recruit and retain the finest military in the world;

x The significant military pay and benefit increases over the last decade reflected 

the need to sustain a force under considerable stress – especially the Army and 

Marines – during the height of the Iraq and Afghanistan campaigns;

x One post-9/11 war is over, and the second – our nation’s longest war– is coming 

to an end;

x Overall personnel costs have risen dramatically – some 40 percent above inflation 

since 2001. The Department cannot afford to sustain this growth.

Reflecting these realities, the President’s Fiscal Year 2014 budget included a package of 

modest compensation-related reforms that have the strong support of our uniformed leadership.

Congress has signaled its opposition to some of these proposals, including modest increases in

TRICARE fees for working age retirees. But given our current fiscal situation, DoD has no 

choice but to consider compensation changes of greater magnitude for military and civilian 

personnel. 

The review developed compensation savings options that we believe would continue to 

allow the military to recruit and retain the high quality personnel we need. If we were to pursue 

these options, we would need Congress’ partnership to implement many of them. Examples 

include:

x Changing military health care for retirees to increase use of private-sector 

insurance when available;

x Changing how the basic allowance for housing is calculated so that individuals 

are asked to pay a little more of their housing costs;

x Reducing the overseas cost of living adjustment;

x Continuing to limit military and civilian pay raises.
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Many will object to these ideas – and I want to be clear that we are not announcing any 

compensation changes today. Instead, I’ve asked Chairman Dempsey to lead an effort with the 

Service Chiefs and Senior Enlisted Advisors to develop a package of compensation proposals 

that meets savings targets identified in the review – almost $50 billion over the next decade –

and still enable us to recruit and retain a high-quality force. We would begin implementing this 

package in the FY 2015 budget. Senior OSD staff will lead a similar review for civilian pay and 

benefits. 

The review also identified more sweeping changes to meet sequester-level targets – such 

as eliminating civilian pensions for retired military personnel serving in civilian government 

service, ending subsidies for defense commissaries, and restricting the availability of

unemployment benefits. This package would yield savings of almost $100 billion over the next 

decade, but would have a significant impact on our service members and our workforce. But a

sequester-level scenario would compel us to consider these changes because there would be no 

realistic alternative that did not pose unacceptable risk to national security. 

STRATEGIC CHOICES – FORCE STRUCTURE AND MODERNIZATION

The efficiencies and compensation reforms identified in the review – even the most 

aggressive changes – still leave DoD some $350 to $400 billion short of the $500 billion in cuts 

required by sequestration over the next ten years. The review had to take a hard look at changes 

to our force structure and modernization plans. 

The President’s Defense Strategic Guidance anchored this effort. The goal was to find 

savings that best preserved the tenets of the President’s strategy, such as strategic deterrence, 

homeland defense, and the rebalance to the Asia-Pacific. The review concluded we should not 

take reductions proportionally across the military services. Instead, the options we examined 

were informed by strategy, and they will guide the services as they build two sets of budgets for 

FY 2015 through 2019 – one at the President’s budget level and one at sequester-level caps.

While we want to preserve flexibility for each military service to develop the best force 

possible given reduced resources, the review identified areas where we have excess capacity to 

meet current and anticipated future needs. In particular, the analysis concluded that we can 

strategically reduce the size of our ground and tactical air forces – even beyond the current draw 

down. 

I have not made any program or force structure decisions, and more analysis will be 

required before these decisions are made. But with the end of the war in Iraq, the drawdown in 

Afghanistan, and a changing requirement to conduct protracted, large-scale counterinsurgency

operations, it makes sense to take another look at the Army’s force structure – which is currently 

planned to reach 490,000 in the active component and 555,000 in the reserves. 

One option the review examined found that we could still execute the priority missions 

determined by our defense strategy while reducing Army end-strength to between 420,000 and 

450,000 in the active component and between 490,000 and 530,000 in the Army reserves. 

Similarly, the Air Force could reduce tactical aircraft squadrons – potentially as many as five –

and cut the size of the C-130 fleet with minimal risk.

In the months ahead I will work closely with Chairman Dempsey and each of the Service 

Chiefs to reach agreement on the proper size of our armed forces, taking into account real-world 

needs and requirements.

A modest reduction in force structure, when combined with management efficiencies and 

compensation reforms, would enable us to meet the $150 billion in savings required by the 
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President’s budget proposal while still defending the country and fulfilling our global 

responsibilities. We can sustain our current defense strategy under the President’s budget 

request.

Significant reductions beyond the President’s plan would require many more dramatic 

cuts to force structure. The review showed that the “in-between” budget scenario we evaluated 

would “bend” our defense strategy in important ways, and sequester-level cuts would “break” 

some parts of the strategy no matter how the cuts were made. Under sequester-level cuts, our 

military options and flexibility will be severely constrained.

Given that reality, the review examined two strategic approaches to reducing force 

structure and modernization that will inform planning for sequester-level cuts. The basic tradeoff is between capacity – measured in the number of Army brigades, Navy ships, Air Force 

squadrons and Marine battalions – and capability – our ability to modernize weapons systems to 

maintain our military’s technological edge.

In the first approach, we would trade away size for high-end capability. This would 

further shrink the active Army to between 380,000 and 450,000 troops, reduce the number of 

carrier strike groups from 11 to eight or nine, draw down the Marine Corps from 182,000 to 

between 150,000 and 175,000, and retire older Air Force bombers. We would protect 

investments to counter anti-access and area-denial threats, such as the long range strike family of 

systems, submarine cruise-missile upgrades, and the Joint Strike Fighter. And we would 

continue to make cyber capabilities and special operations forces a high priority.

This strategic choice would result in a force that would be technologically dominant, but 

would be much smaller and able to go fewer places and do fewer things, especially if crises 

occurred at the same time in different regions of the world.

The second approach would trade away high-end capability for size. We would look to 

sustain our capacity for regional power projection and presence by making more limited cuts to 

ground forces, ships and aircraft. But we would cancel or curtail many modernization programs, 

slow the growth of cyber enhancements, and reduce special operations forces.

Cuts on this scale would, in effect, be a decade-long modernization holiday. The military 

could find its equipment and weapons systems – many of which are already near the end of their 

service lives – less effective against more technologically advanced adversaries. We also have to 

consider how massive cuts to procurement, and research and development funding would impact 

the viability of America's private sector industrial base.

These two approaches illustrate the difficult trade-offs and strategic choices that would 

face the department in a scenario where sequester-level cuts continue. Going forward, in the 

months ahead, DoD – and ultimately the President – will decide on a strategic course that best 

preserves our ability to defend our national security interests under this very daunting budget 

scenario.

The balance we strike between capability, capacity and readiness will determine the 

composition and size of the force for years to come. We could, in the end, make decisions that 

result in a very different force from the options I've described today. Our goal is to be able to 

give the President informed recommendations, not to pre-judge outcomes. Regardless, the 

decision-making process will benefit from the insights this review provided.

In closing, one of the most striking conclusions of the Strategic Choices and Management 

Review is that if DoD combines all the reduction options I’ve described – including significant

cuts to the military’s size and capability – the savings fall well short of meeting sequester-level 

cuts, particularly during the first five years of these steep, decade-long reductions.
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6

The reality is that cuts to overhead, compensation, and forces generate savings slowly. 

With dramatic reductions in each area, we do reach sequester-level savings – but only towards 

the end of a 10-year timeframe. Every scenario the review examined showed shortfalls in the 

early years of $30-35 billion. 

These shortfalls will be even larger if Congress is unwilling to enact changes to 

compensation or adopt other management reforms and infrastructure cuts we proposed in our 

fiscal year 2014 budget. Opposition to these proposals must be engaged and overcome, or we 

will be forced to take even more draconian steps in the future. 

A lot has been said about the impact of sequestration. Before this review, like many 

Americans, I wondered why a 10 percent budget cut was in fact so destructive. Families and 

businesses trim their costs by similar proportions. But this analysis showed in the starkest terms 

how a 10 percent defense spending reduction causes in reality a much higher reduction in 

military readiness and capability. Unlike the private sector, the federal government – and the 

Defense Department in particular – simply does not have the option of quickly shutting down 

excess facilities, eliminating entire organizations and operations, or shedding massive numbers 

of employees – at least not in a responsible, moral and legal way. 

The fact is that half of our budget – including areas like compensation where we need to 

achieve savings – are essentially off limits for quick reductions. Given that reality, the only way 

to implement an additional, abrupt 10 percent reduction in the defense budget is to make 

senseless, non-strategic cuts that damage military readiness, disrupt operations, and erode our 

technological edge. We have already seen some of the significant effects of the $37 billion 

reduction occurring in this fiscal year – including halting all flying for some Air Force 

squadrons, cancelling ship deployments, ending Army Combat Training Center rotations for 

brigades not deploying to Afghanistan, and imposing furloughs for 650,000 DoD civilians. 

In Fiscal Year 2014, this damage will continue if sequestration persists. DoD is now 

developing a contingency plan to accommodate the $52 billion sequester-level reduction in fiscal 

year 2014, which I outlined in a letter this month to Senate Armed Services Committee 

Chairman Levin and Ranking Member Inhofe. Congress will need to help us manage these deep 

and abrupt reductions responsibly and efficiently.

The bold management reforms, compensation changes and force structure reductions 

identified by the Strategic Choices and Management Review can help reduce the damage that 

would be caused by the persistence of sequestration in Fiscal Year 2014, but they won’t come 

close to avoiding it altogether.

The review demonstrated that making cuts strategically is only possible if they are 

“backloaded.” While no agency welcomes additional budget cuts, a scenario where we have 

additional time to implement reductions – such as in the President’s budget – would be far 

preferable to the deep cuts of sequestration. If these abrupt cuts remain, we risk fielding a force 

that over the next few years is unprepared due to a lack of training, maintenance, and the latest

equipment. 

As I mentioned last week at the VFW Convention, a top priority in future year budget 

plans is to build a ready force, even if that requires further reductions in force structure. No 

matter the size of our budget, we have a responsibility to defend the country and America’s vital 

interests around the world. That means crafting the strongest military possible under whatever 

level of resources we are provided. 

DoD has a responsibility to give America’s elected leaders, and the American people, a 

clear-eyed assessment of what our military can and cannot do in the event of a major 
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7

confrontation or crisis after several years of sequester-level cuts. In the months ahead, we will 

continue to provide our most honest and best assessment. And the inescapable conclusion is that 

letting sequester-level cuts persist would be a huge strategic miscalculation that would not be in 

our country’s best interests. While I’ve focused today on the impact to DoD, sequester-level cuts 

would equally harm other missions across government that support a strong economy and a 

strong national defense by providing support to our service members, veterans, and their 

families. DoD depends on a strong education system to maintain a pool of qualified recruits, we 

rely on domestic infrastructure that surrounds our bases and installations, and we count on 

scientific breakthroughs funded by research and development grants and a strong manufacturing 

base to maintain our decisive technological edge. All of these areas are threatened by 

sequestration.

It is the responsibility of our nation’s leadership to work together to replace the mindless 

and irresponsible policy of sequestration. It is unworthy of the service and sacrifice of our 

nation’s men and women in uniform and their families. And even as we confront tough fiscal 

realities, our decisions must always be worthy of the sacrifices we ask America’s sons and 

daughters to make for our country.

# # #

WITNESS RESPONSES TO QUESTIONS ASKED DURING 

THE HEARING 

AUGUST 1, 2013 

(105) 

RESPONSE TO QUESTION SUBMITTED BY MR. MCKEON 

Secretary CARTER. There were extraordinary circumstances this year that delayed 

the appointment of the National Defense Panel (NDP) co-chairs. First, Secretary 

Hagel did not take office until February 27, 2013. In addition, the Department was 

facing significant budget cuts whose long-term impact urgently needed to be understood. Secretary Hagel therefore directed the Strategic Choices and Management 

Review (SCMR) to develop potential options for managing these cuts. The defense 

strategy must be appropriately informed by the resources available to implement it; 

thus, Quadrennial Defense Review (QDR)-related work, including NDP appointments, was deferred until the SCMR was complete. 

Upon completing the SCMR, Secretary Hagel appointed former Secretary of Defense William Perry and retired General John Abizaid as the co-chairs of the NDP. 

Congressional staff was informed of these appointments on June 27th and 28th. The 

Department also hosted the NDP’s inaugural, day-long meeting at the Pentagon on 

August 20th. 

The QDR will review the Department’s strategic priorities and define its missions, 

capabilities, and programs over the long term, taking into account the future security environment and priority missions for which U.S. forces must prepare. The 

work undertaken for the SCMR will facilitate and inform the QDR. [See page 43.] 

RESPONSE TO QUESTION SUBMITTED BY MR. WILSON 

Secretary CARTER. When Secretary Hagel said, ‘‘[o]verall, personnel costs have 

risen dramatically, some 40 percent above inflation since 2001,’’ he was referring to 

the increase in Military Personnel funding from 2001 to 2013. In 2001, the Department spent $112B (in FY14$) from the Military Personnel account, while in 2013, 

DOD spent $156B (in FY14$) from that account. This is an increase of 40% above 

inflation. Not all of this increase is due to pay increases. There are more active duty 

personnel and more activated reserves serving today than there were in 2001, increasing the cost to the Department. There are also other items in the account beyond pay for current military personnel, such as retired military pay accrual and 

Medicare-eligible Health Care accrual, which experienced cost growth. Additionally, 

there was growth in the costs of some of the benefits provided to Service members 

(e.g., housing) that also contributed to the increased costs in the Military Personnel 

account beyond inflation. [See page 26.] 

RESPONSE TO QUESTION SUBMITTED BY MS. HANABUSA 

Secretary CARTER. The Strategic Choices and Management Review (SCMR) looked 

at the entire Department, and all of the Services are facing end-strength cuts as 

well as severe reductions in funding as a result of sequester-level cuts. We typically 

talk about capacity cuts for the Army and Marine Corps in end-strength terms, and 

cuts in Navy and Air Force in terms of numbers of ships and aircraft squadrons. 

The Services are now in the midst of determining exactly what a smaller military 

would look like and what it would be capable of doing. I hope the results of the 

SCMR indicate why we need the cloud of budgetary uncertainty and turbulence to 

be dispelled so that we can continue the strategic transition upon which we have 

embarked with certainty and stability. 

The Department strongly supports the President’s Budget Submission for Fiscal 

Year 2014 and the long-term budget plan for the entire Federal Government that 

makes critical investments to strengthen the middle class, create jobs, and grow the 

economy while continuing to cut the deficit in a smart and balanced way. I urge 

Congress to develop a comprehensive and balanced deficit reduction package that 

the House and Senate can pass, and that the President can sign. [See page 28.] 
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RESPONSE TO QUESTION SUBMITTED BY MR. FRANKS 

Secretary CARTER. The Strategic Choices and Management Review (SCMR) was 

never intended to be definitive in describing the future force under various budget 

scenarios. Rather, it was intended to inform the decision space senior leadership 

faced, and, in turn, guide the Services and Defense Agencies in developing their 

budgets. They are now in the midst of determining exactly what a smaller military 

would look like and what it would be capable of doing. This work will dovetail with 

the Quadrennial Defense Review (QDR), which will look at the options for adjusting 

the current strategy and the implications of that assessment. 

That said, the SCMR showed in the starkest terms that sequestration-level budget constraints are incompatible with sustaining the current defense strategy. Sequester is irrational, mindless, and damaging. The $37 billion in FY13 sequestration 

cuts are having a damaging impact on readiness, which limits the United States’ 

military options when responding to crises. The Services are planning now for how 

they would implement their plans if sequester remains in FY14, and the result 

could be a compounding of this year’s damage. The Department will still have an 

obligation to defend the country and maintain global responsibilities. Accordingly, 

DOD will preserve the best possible force to do so in the long term, but sequestration-level caps will limit what is possible—now and in the future. The budgets that 

the Services are developing, combined with the results of the QDR, will position the 

Department to say with more clarity which missions it will no longer be able to 

afford. [See page 37.] 

RESPONSE TO QUESTION SUBMITTED BY MR. NUGENT 

Secretary CARTER. Much of the growth seen in Central Command (CENTCOM) 

was due to a temporary increase in manpower associated with the war effort. Most 

of the reductions for CENTCOM in 2014 are tied to the winding down of the war 

effort. 

The reduction Secretary Hagel is implementing at all major headquarters, based 

on the results of the Strategic Choices and Management Review, is a 20% reduction 

in the 2013 baseline. This is in addition to previously planned reductions, such as 

the plans to reduce CENTCOM in 2014. [See page 39.] 
QUESTIONS SUBMITTED BY MEMBERS POST HEARING 

AUGUST 1, 2013 

(109) 

QUESTIONS SUBMITTED BY MR. WILSON 

Mr. WILSON. 1) The Strategic Choices and Management Review determined that 

the Army could be reduced from the plan of 490,000 to somewhere between 420,000 

and 450,000 for the Active Component and from 555,000 to between 490,000 and 

530,000 for the Reserve Component. 

a. In what timeframe would these reductions take place? 

b. How much risk does the Army incur with respect to strategic capacity in case 

the United States is drawn in to a more traditional war mission instead of a protracted counterinsurgency operation? 

c. How does this impact the Army’s ability to pivot a focus to the Pacific and 

maintain a presence in Europe, Africa, and the Middle East? 

d. With this large of a reduction can we assume that it would require an additional BRAC since it would leave the Army with too much infrastructure for the 

force size? 

Secretary CARTER. a. SCMR assumed that the Active Army would be reduced from 

490,000 to 420,000 by FY19 and the Reserve would be reduced from 555,000 to 

490,000 by FY23. 

b. SCMR determined that, at end-strength of 420,000 to 450,000 Active Duty and 

490,000 to 530,000 Reserves, the Army has the capacity to execute overlapping traditional wars and defend the homeland, with acceptable risk. At these end-strength 

levels, the Army would be more strained to support a large, protracted counterinsurgency operation. 

c. The reduction in Army end-strength provides sufficient forces to prioritize DOD 

focus in the Pacific, while also maintaining some presence in Europe, Africa, and 

the Middle East. 

d. The Secretary stated that the Department would benefit from an additional 

Base Realignment and Closure (BRAC) round to align decreasing manpower with 

infrastructure; accordingly, the Department requested a BRAC in the President’s 

Budget Submissions for FY13 and FY14. 

Mr. WILSON. 2) The plan for reform of the Administration of the Military Health 

System includes a proposed increase in the personnel in the Office of the Assistant 

Secretary of Defense for Health Affairs from the current level of 45 to 121 to include 

retaining the four Deputy Assistant Secretaries. The plan calls for this plus-up by 

October 1, 2013. How does this personnel increase meet the requirement to reduce 

headquarters by 20 percent? Despite the continuing assertion by DOD officials that 

health care costs are negatively affecting the overall DOD budget, the cost growth 

of the Defense Health Program from FY 13 to FY 14 is $300 million, an increase 

of just under 1 percent. The cost of care in the Military Treatment facilities rose 

by $175 million, less than 1 per cent. The cost of Private Sector Care decreased by 

$650 million. Over the last 3 years DOD has requested authority to reprogram in 

excess of $1.2 billion from the DHP to non-health-care-related activities. What do 

you anticipate will be unexpended in the DHP for this fiscal year? 

Secretary CARTER. The plan to reduce management headquarters by 20% will be 

executed against an accurate baseline of headquarters personnel accounting, regardless of potential realignments among headquarters elements. It is important to note 

that the referenced proposed increase of personnel in the Office of the Assistant Secretary of Defense for Health Affairs (HA), from the current level of 45 to 121, is 

actually a realignment from the current TRICARE Management Activity (TMA) personnel who support headquarters functions as part of the current dual-hatting organizational structure between HA and TMA. There is no net increase in personnel 

in the Military Health System headquarters elements as a part of this realignment. 

Given the size of the Defense Health Program’s appropriation and the variability 

inherent in the beneficiary population’s demand for health care, it is impossible to 

predict with great accuracy, as of this writing, what the Department’s final financial 

position will be, to include unobligated/unexpended funds. Fiscal Year 2013 was 

further complicated by a Continuing Resolution as well as a reduction due to 

sequestration. 

Mr. WILSON. 3) Secretary Hagel recently visited a commissary at Naval Air Station Jacksonville and, as I understand, he is the first Secretary of Defense to visit 
110 

a commissary and I thank him for taking the time to personally view this important 

benefit and meet the families it supports. According to a recent Resource Management Directive, the Defense Commissary Agency has been told to study the feasibility of focusing its operations mostly or entirely overseas and cut its budget by 

33%. The study was due to the Secretary of Defense by 1 July. Is it truly the intent 

of the Department to eliminate CONUS commissaries and deprive military families 

on CONUS bases of this very important non-pay compensation benefit? If so, has 

the Department determined how much it would have to spend on maintaining overseas commissaries due to the loss of nearly 70% of surcharge funds generated by 

CONUS commissaries that currently support those overseas? Has the Department 

calculated potential impacts on readiness and retention if the cuts and closures are 

implemented? Finally, what is the net effect monetarily of implementing the RMD 

after adding other costs that are offset by the commissaries, such as maintenance 

of overseas commissaries, COLAs, unemployment compensation, adverse impacts to 

readiness and retention, etc.? 

Secretary CARTER. At the outset, let me assure you that the Department continues to explore the future of military commissaries. In addition, the Resource 

Management Directive (RMD) report has not been delivered to the Secretary or me, 

so I am unable to comment about its contents at this time. 

QUESTIONS SUBMITTED BY MR. LANGEVIN 

Mr. LANGEVIN. 4) I understand that much of what you have to say today is very 

broadly couched and that many difficult decisions remain to be made as you choose 

from, as the Secretary said, a menu of options to deal with the mindless cuts that 

sequestration imposes. I applaud the Department’s willingness to seriously examine 

reducing DOD’s overhead and administrative costs, and share the view that this is 

an important route to cost savings, despite the backloading of the savings. But as 

the Department continues to dive into the very stark options that you have laid out 

and make some budgetary choices, I would simply emphasize the importance of having discussions with Congress sooner rather than later. I would also emphasize that 

I am very concerned over any degradation in our cutting-edge capabilities and our 

investments in the fundamentals of a strong national defense, such as STEM and 

R&D. Our vulnerabilities, and the interest of our adversaries, in these leading-edge 

capabilities would make any reduction penny-wise but pound-foolish. I am particularly concerned given that cuts in R&D show immediate budget effects but their 

more pernicious effects take years to set in, whereas personnel and other savings 

are much more backloaded. To that end, how did the Department look at secondand third-order effects of reductions—the effects on future workforce, other agencies, 

and other such groups outside the DOD? 

Secretary CARTER. During the Strategic Choices and Management Review (SCMR) 

the Department worked to consider the impacts to the future workforce and others 

outside of DOD. For example, the Department leveraged previous studies on recruitment and retention to evaluate impacts to pay and compensation. However, the 

timeline that SCMR was working under did not permit a detailed quantitative assessment of the second- and third-order effects resulting from sequester-level cuts. 

That said, sequester-level cuts would harm missions across Government that support a vibrant economy and a strong national defense. The Department depends on 

a world-class education system to maintain a pool of qualified recruits, as well as 

on a domestic infrastructure that surrounds our bases and installations. DOD also 

counts on scientific breakthroughs funded by R&D grants joined with a strong manufacturing base to maintain our decisive technological edge. All of these aforementioned areas are threatened by sequestration. The Department must work with 

other impacted agencies to make the case for ending sequestration and assessing 

the second- and third-order effects that have yet to materialize. If the sequester 

remains the law of the land, I agree that the potential repercussions are very 

concerning. 

Mr. LANGEVIN. 5) During the out-brief of the CSBA ‘‘strategic choices exercise,’’ 

all four teams generally characterized the current budgetary constraints due to sequestration as unsustainable for securing U.S. interests and fulfilling our international obligations. Do you agree with that assessment? 

Secretary CARTER. The Department agrees with this assessment. The abrupt, 

deep cuts caused by the Budget Control Act of 2011 (BCA) caps force DOD to continue to make the sort of nonstrategic choices made this year. The Services are currently planning for how they would implement their plans if sequester remains in 

fiscal year 2014, and the result could be a compounding of the current damage. If 

the cuts continue, the Department will have to make sharp cuts with far-reaching 
111 

consequences, including limiting combat power, reducing readiness, and undermining the national security interest of the United States. Sequestration-level caps 

will limit what DOD can do—both now and in the future. 

Mr. LANGEVIN. 6) Dr. Auslin from the American Enterprise Institute mentioned 

at a recent hearing that the ‘‘U.S. should find it worrisome that every nation in the 

Asia-Pacific that can afford more weapons is buying more weapons.’’ Additionally, 

ADM Roughead stated at the same hearing that the real power of Asia is the ‘‘economy’’ and that we need to maintain stability within the region so no ‘‘one’’ nation 

is dominant. Under the scenarios in the SCMR, are we able to conduct the pivot 

to the Asia-Pacific region? If so, what costs and risks may be incurred elsewhere 

in the world if we do? 

Secretary CARTER. No matter the fiscal scenario, the Department remains committed to executing the rebalance to the Asia-Pacific. Indeed, the Secretary made 

his second trip to the Asia-Pacific this month. What the SCMR did reveal was that, 

at sequestration-level caps, the Department is unable to completely implement the 

planned rebalance. DOD will have to make adjustments. The Quadrennial Defense 

Review will take a closer look at the options for adjusting the current strategy and 

the implications on the Department’s global activities. 

Mr. LANGEVIN. 7) One of the assumptions made during SCMR was changes in the 

law that would grant the DOD flexibility in implementing the reductions. What happens if you don’t get this flexibility? 

Secretary CARTER. The SCMR did not assume that Congress grants the Department flexibility in meeting sequester-level budget caps. DOD fully recognized the 

challenges in gaining approval to implement statutory changes, which is why some 

proposals were characterized as more risky. That said, the Department must cut 

more deeply into its force structure without this flexibility. 

DOD needs Congress to be a full partner. Specifically, it needs Congress’ help on: 

• Remove restrictions that limit DOD’s ability to manage efficiently. For example: 

Æ The rate at which the Department can draw down ground forces is capped 

by law. At sequestration levels, DOD may want to come down faster, to gain 

savings earlier and shift resources back into readiness and modernization as 

quickly as possible. 

Æ The law presently restricts the Department’s ability to rebalance the military/ 

civilian mix in the medical field, which precludes DOD from lowering costs 

without impacting the ability to perform its mission. 

Æ The Department still does not have authority to conduct another Base Realignment and Closure round. DOD knows it has excess installations today, 

and sequester will only add to that excess. 

• Compensation Reform. The Department must slow growth in military pay 

raises in manner that still supports the All-Volunteer Force. DOD must also be 

able to raise fees for health care programs for retirees while still maintaining 

the generous benefits they deserve. The force is healthy and recruiting and retention numbers are excellent—we can make some adjustments here. These proposals were made in the President’s fiscal year 2014 budget submission. 

Still, although flexibility would of course help, it is not a panacea. Flexibility 

alone would not permit the Department to accommodate these very large and abrupt reductions without causing serious harm to DOD’s mission. Even with flexibility, readiness would at best remain at current degraded levels and many investment programs would be seriously disrupted. 

Mr. LANGEVIN. 8) If the Budget Control Act’s sequester-level caps remain in Fiscal 

Year 2014 then what impacts will this have on DOD’s modernization portfolio? 

What major defense acquisition programs will be curtailed or even terminated to 

achieve this cap level? 

Secretary CARTER. This decision holds enormous complexity, and there is no simple answer. If current sequester level caps remain in place, the ability to modernize 

Department of Defense portfolios will decrease significantly. As budget levels are established, requirements will be prioritized for execution in the Planning, Programming, Budgeting, and Execution cycle. Until exact budget levels are known, it will 

be nearly impossible to forecast which programs in the Department’s modernization 

portfolio will remain unchanged, will experience reduced funding and/or schedule 

delays, or will be cut outright. 

The Department’s Senior Acquisition Executives reinforced this in recent testimony to the Subcommittee on Tactical Air and Land Forces, United States House 

of Representatives. Fiscal Year 14 funding level will impact all Air Force investment 

programs. Program disruptions will cost more taxpayer dollars to rectify contract 

breaches, raise unit costs, and delay delivery of critical equipment. Sequestration 
112 

will potentially impact every Navy program and system, forcing reductions in procurement quantities, delays in schedules (delivery and initial operational capability), 

deferral of costs to future years, and unnecessary cost growth. The budget pressures 

will create significant risk to Army aviation modernization efforts. Multiyear contract efficiencies are jeopardized as quantities of UH–60 and CH–47 helicopters may 

be reduced across the Department. Planned upgrades and modernization of combat 

vehicles would also be affected if sequestration occurs in FY14, potentially resulting 

in delays to scheduled upgrades to the Abrams tank and Bradley Infantry Fighting 

Vehicle. Over time, we will assume significant risk in planned modernization of 

combat vehicles, to include the Army’s next-generation infantry fighting vehicle. 

Ultimately, if needed, termination or curtailment of major defense acquisition programs will be a result of careful consideration of Warfighter requirements balanced 

with fiscal constraints. The current fiscal environment may result in a potential decrease of up to 20 percent in both investment and research and development accounts. As demonstrated, this will have momentous near- and far-term implications. 

Mr. LANGEVIN. 9) I understand that much of what you have to say today is very 

broadly couched and that many difficult decisions remain to be made as you choose 

from, as the Secretary said, a menu of options to deal with the mindless cuts that 

sequestration imposes. I applaud the Department’s willingness to seriously examine 

reducing DOD’s overhead and administrative costs, and share the view that this is 

an important route to cost savings, despite the backloading of the savings. But as 

the Department continues to dive into the very stark options that you have laid out 

and make some budgetary choices, I would simply emphasize the importance of having discussions with Congress sooner rather than later. I would also emphasize that 

I am very concerned over any degradation in our cutting-edge capabilities and our 

investments in the fundamentals of a strong national defense, such as STEM and 

R&D. Our vulnerabilities, and the interest of our adversaries, in these leading-edge 

capabilities would make any reduction penny-wise but pound-foolish. I am particularly concerned given that cuts in R&D show immediate budget effects but their 

more pernicious effects take years to set in, whereas personnel and other savings 

are much more backloaded. To that end, how did the Department look at secondand third-order effects of reductions—the effects on future workforce, other agencies, 

and other such groups outside the DOD? 

Admiral WINNEFELD. The SCMR did its best to consider impacts to the future 

work force and others outside the Department. For example, it leveraged previous 

studies on recruitment and retention to evaluate impacts to pay and compensation. 

Although we discussed the potential impacts of reduced funding on collaborative efforts that DOD has with other agencies, such as Department of State and Department of Homeland Security, the SCMR timelines didn’t permit a detailed quantitative assessment. 

Mr. LANGEVIN. 10) During the out-brief of the CSBA ‘‘strategic choices exercise,’’ 

all four teams generally characterized the current budgetary constraints due to sequestration as unsustainable for securing U.S. interests and fulfilling our international obligations. Do you agree with that assessment? 

Admiral WINNEFELD. I agree with the assessments that the current constraints 

with regard to the manner in which sequestration must be executed, are 

unsustainable for securing U.S. interests and fulfilling our international obligations. 

The most damaging element of the whole process is the speed at which the reductions hit us. They are sudden and deep, rather than gradual and backloaded. For 

a variety of reasons, for example, how fast we can or should get people out of the 

service, and the legislative limits on the ways we can cut, at the BCA level of reductions, they simply happen faster than we can digest them in a balanced and sensible 

way. With these constraints, all we will be able to do in the early years is grab 

money wherever we can, mostly out of the modernization and readiness accounts, 

which is particularly disruptive to our ability to defend this Nation. 

Mr. LANGEVIN. 11) Dr. Auslin from the American Enterprise Institute mentioned 

at a recent hearing that the ‘‘U.S. should find it worrisome that every nation in the 

Asia-Pacific that can afford more weapons is buying more weapons.’’ Additionally, 

ADM Roughead stated at the same hearing that the real power of Asia is the ‘‘economy’’ and that we need to maintain stability within the region so no ‘‘one’’ nation 

is dominant. Under the scenarios in the SCMR, are we able to conduct the pivot 

to the Asia-Pacific region? If so, what costs and risks may be incurred elsewhere 

in the world if we do? 

Admiral WINNEFELD. SCMR, used the January 2012 Defense Strategic Guidance 

(DSG) to guide our analysis. As you are aware, the DSG guides our rebalance to 

the Asia-Pacific. All of the SCMR ‘‘scenarios’’ used during the strategic choices re-
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view maintain our Asia-Pacific rebalance while accounting for fiscal realities going 

forward. 

As Secretary Hagel said in his Shangri-La speech, ‘‘it would be unwise and shortsighted . . . to conclude that our commitment to the rebalance cannot be sustained 

. . . like the employment of all resources, it is always a matter of the wise, judicious, 

and strategic use of those resources that matters the most and has the most lasting 

impact.’’ 

While sustainable over the long term, the rebalance may take longer to fully execute due to budgetary constraints caused by sequestration. Time and fiscal realities 

afford us an opportunity to ensure we are putting the right resources in the right 

places. We will continue our steady, thoughtful, and measured rebalance to the region—although some new and key relationships will take longer to develop and 

deepen because of sequestration (de-scoped exercises because of reducing steaming 

and flying hours). 

We will strive to ensure risk incurred in other areas of the world, as a result of 

sequestration and the rebalance, will remain at acceptable levels. We will continue 

to monitor the risk throughout the rebalance and keep you apprised through the 

Chairman’s Risk Assessment, which we submit to Congress every spring. 

Mr. LANGEVIN. 12) One of the assumptions made during SCMR was changes in 

the law that would grant the DOD flexibility in implementing the reductions. What 

happens if you don’t get this flexibility? 

Admiral WINNEFELD. If we don’t get flexibility, our choices will be greatly limited. 

We must have flexibility to appropriately reshape the Department if we will absorb 

another nearly half-trillon dollars in budget reductions. Flexibility is required in 

three main areas. The first area includes elimination of restrictions on reducing or 

adjusting force structure. Cuts at the sequestration level require us to reduce personnel and equipment. Limiting reductions in these areas will cause disproportionate cuts to readiness and modernization—it is zero-sum. Second, we need to 

work with Congress on establishing flexibility in our pay, compensation, and medical accounts. Without this flexibility, we will lock one area of our budget, in this 

case personnel costs, while forcing disproportionate cuts to procurement, readiness, 

R&D, and operations. Finally, we need your support for reducing excess infrastructure through BRAC in 2015. The previous five rounds of BRAC eliminated excess 

infrastructure and save $12B per year that is invested in our joint force. 

Mr. LANGEVIN. 13) If the Budget Control Act’s sequester-level caps remain in Fiscal Year 2014 then what impacts will this have on DOD’s modernization portfolio? 

What major defense acquisition programs will be curtailed or even terminated to 

achieve this cap level? 

Admiral WINNEFELD. Abrupt, deep cuts caused by the BCA caps in FY 2014 will 

force the Department to make nonstrategic changes that impact the Department’s 

modernization portfolio. The Department remains firmly committed to enactment of 

the President’s defense budget for FY 2014 because it provides the right level of resources to maintain a strong national defense. 

Still, I recognize that a contingency plan must be developed in the event that the 

sequester-level budgetary caps currently imposed by the BCA remain in effect year 

over year. Although the specifics are still in development, DOD would be forced to 

make disproportionate reductions in procurement, research and development, and 

military construction. The Department will seek to protect most or all funding for 

a few programs that are most critical to our military strategy; however, funding for 

hundreds of program line items, large and small, will have to be cut significantly. 

This translates to buying fewer ships, planes, ground vehicles, satellites, and other 

weapons, and sharps cuts to modification programs and research funding. 

QUESTION SUBMITTED BY MR. LOEBSACK 

Mr. LOEBSACK. 14) Admiral Winnefeld, please provide additional detail regarding 

the implementation of end-strength reductions as reviewed in the strategy. Did the 

strategy look at the total force and the balance between the Active Duty and Reserve Components? What conclusions, if any, did the review come to regarding the 

balance between the two components? 

Admiral WINNEFELD. The strategy encompasses the total force. The Services use 

an established, comprehensive, and transparent process to determine the optimal 

number and mix of Active and Reserve Component forces balanced with the National Military Strategy. As we work through the process of sequestration-level force 

structure reductions, we have put everything on the table, but at this time, we do 

not have conclusions on the mix of Active and Reserve forces. 
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QUESTIONS SUBMITTED BY MR. SHUSTER 

Mr. SHUSTER. 15) What steps are being taking to ensure that future budget constraints are not mitigated through the use of future furloughs that impact readiness, morale, and financial security of the civilian workforce? 

Secretary CARTER. As the Department contends with FY 2013 funding reductions 

and the prospect of continued sequester-level Budget Control Act (BCA) caps resulting in a cut of $52 billion in funding in FY 2014, Operations and Maintenance 

(O&M) funds cannot be protected. Cuts in O&M funding would also affect DOD’s 

civilian workforce because many civilians are paid with O&M dollars. To minimize 

adversity to our valued civilian workforce, the Department will continue current hiring freezes (as appropriate), minimize the use of temporary and term employees, 

and encourage the liberal use of Voluntary Separation Incentive Pay (VSIP) and 

Voluntary Early Retirement Authority (VERA), both of which are valuable in reducing involuntary separations and associated costs. 

I am hopeful that Congress will pass a deficit reduction package that the President can sign and detrigger sequestration. A comprehensive solution of this nature 

would do much to support the mission of the DOD and prevent the need for sharp 

reductions in the funding supporting the civilian workforce. 

Mr. SHUSTER. 16) If sequestration remains, as a result of the President’s failure 

to work with the legislative branch, what are the DOD plans to ensure that the organic industrial base will survive budget cuts to support the future needs of the 

warfighter? 

Secretary CARTER. The Department recognizes that maintaining an organic industrial base provides readily available base and surge capabilities that enable DOD 

forces to respond to mobilization, national defense contingency situations, and other 

emergency requirements. Supporting an organic industrial base, as well as a commercial industrial base, will be a very difficult challenge in the face of severely restricted budgets. Industrial activities are competing with operational components for 

scarce resources. 

The Department is taking proactive steps to mitigate these challenges. Existing 

authorities, such as public-private partnerships under 10 U.S.C. 2474, will be leveraged to the maximum extent possible. However, without authorization for a new 

round of Base Realignment and Closure, the Department may not efficiently align 

the military’s infrastructure with the needs of its evolving force structure, which is 

critical to ensure limited resources are available to support the highest priorities of 

the warfighter and national security. 

Mr. SHUSTER. 17) How is utilizing a BRAC round as a near-term solution for current budget shortfalls justified when previous rounds have proven more costly upfront and the potential savings are not realized beyond a 10-year window? What 

changes does the DOD plan to make to ensure a BRAC round would be beneficial? 

Are base closures and realignments overseas being looked at prior to domestic sites? 

Secretary CARTER. While there are upfront costs for BRAC, in the long term there 

are significant savings. The previous five BRAC rounds (’88, ’91, ’93, ’95, ’05) closed 

121 major bases and resulted in hundreds of other realignments and minor closures, 

saving a total of $12 billion annually. 

I agree the Department of Defense cannot afford another $35 billion BRAC round 

similar to 2005. However, the key factor that drove the cost of the last BRAC round 

was the willingness to accept recommendations that were not designed to save 

money. Nearly half of the recommendations from the last round were focused on 

taking advantage of opportunities only available under a BRAC process to move 

forces and functions to where they made sense, even if doing so would not save 

much money. They were pursued because the realignment itself was important, not 

the savings. This ‘‘Transformation BRAC’’ cost just over $29 billion and resulted in 

a small proportion of the savings from the last round. Even so, it allowed the Department to improve the distribution of forces within its infrastructure in ways that 

are difficult to achieve outside of a BRAC round, while also recapitalizing aging infrastructure. This was an opportunity that the Department could afford when budgets were higher and the Department was experiencing growth. 

The remaining recommendations made under BRAC 2005 paid back in less than 

7 years, despite experiencing cost growth. In contrast to the ‘‘Transformation 

BRAC,’’ these ‘‘Efficiency BRAC’’ recommendations only cost an estimated $6 billion, 

with an annual payback of approximately $3 billion. This part of BRAC 2005 paid 

for itself speedily and will produce savings for the Department in perpetuity. If the 

Department receives authority to conduct another BRAC round, it anticipates undertaking a similar ‘‘Efficiency BRAC’’ (lower costs and savings with quicker payback and a focus on efficiency). A BRAC round that is focused on efficiency recommendations can succeed and makes eminent sense in today’s fiscal climate. 
115 

The Department has initiated a comprehensive infrastructure analysis to identify 

potential opportunities for consolidation in Europe. The process will ultimately result in a validation of DOD’s enduring European infrastructure requirements, providing an analytical basis to support sustainment funding and future recapitalization. By the end of this calendar year, we plan to have a Department-vetted list of 

European infrastructure options from which the DOD leadership can make strategic 

investment decisions. But given the size of the budget cuts, it is unrealistic to expect 

that DOD can make all reductions via overseas bases and installations alone. 

Mr. SHUSTER. 18) Missile Defense remains a significant priority. When will the 

Service Branches bring members of the HASC into the planning phase of future 

funding plans to ensure that cuts aren’t arbitrarily made in programs considered 

priority of the HASC? 

Secretary CARTER. The Prioritized Capabilities List guides program priorities and 

the development of the missile defense budgets. The Department of Defense will 

continue to work with Congress through the annual authorization and appropriations processes to ensure adequate funding for defense programs are submitted as 

part of the President’s Budget submission and also to ensure congressional priorities 

are included. 

Mr. SHUSTER. 19) How is utilizing a BRAC round as a near-term solution for current budget shortfalls justified when previous rounds have proven more costly upfront and the potential savings are not realized beyond a 10-year window? What 

changes does the DOD plan to make to ensure a BRAC round would be beneficial? 

Are base closures and realignments overseas being looked at prior to domestic sites? 

Admiral WINNEFELD. DOD cannot afford to keep excess infrastructure in an era 

of budget and security uncertainty. The tax on our warfighters is unacceptable as 

each dollar spent on excess infrastructure cannot be spent on maintaining our superb joint force. Absent BRAC, the Department will continue to support unnecessary 

infrastructure, so BRAC must be an essential part of any overall DOD reshaping 

strategy. 

Given the force structure reductions on the horizon and the budget constraints we 

face, we have every expectation that a future round will be far more similar to the 

first four BRAC rounds than the most recent round in 2005 in terms of costs and 

savings. The first four rounds of BRAC (1988, 1991, 1993, and 1995) are producing 

a total of approximately $8 billion in annual recurring savings with an average payback of less than 7 years, and BRAC 2005 is producing an additional $4 billion in 

annual recurring savings. 

It’s important to note that the 2005 BRAC round was very different than the first 

four rounds. BRAC 2005 had two components with the major component focused on 

‘‘transformation.’’ The other component, ‘‘closure,’’ was more traditionally aligned 

with previous BRAC rounds which eliminated excess infrastructure. The major, or 

‘‘transformation,’’ component of BRAC 2005 cost about $29 billion with military construction accounting for over $11 billion of this cost. In addition, the transformation 

component of BRAC 2005 included recommendations that had no savings or produced limited savings to include infrastructure consolidation. The more traditional 

or ‘‘closure’’ component of BRAC 2005 cost about $6 billion to implement, paid for 

itself in less than 7 years, and is now generating $3 billion in annual savings. The 

next BRAC round would be squarely focused on closure and eliminating excess 

capacity. 

A 2004 survey found that the Department had 24% aggregate excess capacity, 

while BRAC 2005 only reduced capacity by 3.4%. Thus, the Department believes we 

have about 20% excess capacity at the aggregate level today. With today’s force 

structure declining relative to 2005 levels, our excess capacity will continue to grow. 

No successful business would carry the amount of excess infrastructure that DOD 

currently is forced to maintain. 

While we clearly have excess capacity, many have asserted that we should look 

first at our overseas infrastructure for reductions. We have been reducing our overseas infrastructure for years. Since 2003, the Department returned more than 100 

sites in Europe to their respective host nations, and we reduced our overseas personnel strength by one-third. The remaining overseas force structure provides enormous dividends to this country in terms of presence and responsiveness. Ongoing 

force structure changes should produce additional opportunities for reducing infrastructure both at home and abroad while preserving the best joint force that is 

ready and postured for full-spectrum operations. 

Mr. SHUSTER. 20) Missile Defense remains a significant priority. When will the 

Service Branches bring members of the HASC into the planning phase of future 

funding plans to ensure that cuts aren’t arbitrarily made in programs considered 

priority of the HASC? 
116 

Admiral WINNEFELD. The restructuring of DOD under the Strategic Choices and 

Management Review, and the subsequent decisions from the QDR, will be a comprehensive process that will only succeed with mutual coordination and cooperation 

between DOD and Congress. In accordance with standard budgeting procedures, the 

explanations for all adjustments in key defense programs will be outlined in the 

budget justifications and associated briefings the DOD will present to Congress with 

the FY 2015 budget and associated FYDP. 

QUESTIONS SUBMITTED BY MR. CASTRO 

Mr. CASTRO. 21) and 22) During the hearing you discussed that another round 

of sequestration cuts could result in potentially not taking in new recruits into the 

Services. Can you describe the kinds of impacts that would have on our short-term/ 

long-term recruitment and retention in an All-Volunteer Force and how that impacts national security? 

Secretary CARTER and Admiral WINNEFELD. Another round of sequestration cuts 

could impact force structure and drive a reduction in the number of military personnel. Services will consider the best way to lower overall personnel numbers with 

the least impact on readiness, while attempting to maintain a positive tone. Although we have force management tools that allow us to reduce personnel strength 

on the current force, we also may reduce accession numbers to maintain balance in 

the overall force. 

Additionally, the negative impact of another sequestration on operations and 

training will discourage the best and brightest from joining the military and discourage retention of our most talented Service men and women. Any impacts to recruitment and retention will impact the ability of our Service members to execute 

our national security strategy which is hinged upon being the most technologically 

advanced, best equipped, and most highly trained force in the world. 

In addition to the impact on operations and training, the uncertainty surrounding 

sequestration cuts has a corresponding intangible impact on the morale of our Service members. In our All-Volunteer Force we rely on retaining the highest quality 

force. With further cuts and an improving economy retaining quality will become 

more difficult as our Service members look outside the military for opportunities to 

work or serve. 

QUESTION SUBMITTED BY MR. NUGENT 

Mr. NUGENT. 23) Secretary Hagel described the Strategic Choices and Management Review as ‘‘a menu of options.’’ With the drawdown of forces planned at the 

conclusion of our second war in the Central Command Area of Responsibility, 

CENTCOM has already announced plans to reduce their headquarters personnel at 

MacDill by 1,500 by the end of 2014. Just to clarify, when you consider a 20% reduction in major headquarters, is that measured in dollars or manpower? Does the 

menu of options presented in this review account for the reductions that are already 

planned? In other words, when the option of reducing headquarters by 20% is considered, does that mean another reduction for CENTCOM below the 1,500 personnel 

already planned? 

Secretary CARTER. Much of the CENTCOM growth was due to a temporary increase in manpower associated with the war effort. Most of the reductions for 

CENTCOM in 2014 are tied to the winding down of the war effort. 

The reduction Secretary Hagel is implementing at all major headquarters, based 

on the results of the Strategic Choices and Management Review, is a 20% reduction 

in the 2013 baseline. This is in addition to previously planned reductions, such as 

the plans to reduce CENTCOM in 2014. 

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